Europe’s largest private cinema operator has secured funding from its new shareholders to help set up a takeover opportunity at Cineworld, its beleaguered rival.
Sky News has learned that funds managed by Barings and Farallon Capital Management have agreed to provide capital to Vue International to support strategic acquisitions.
City sources said Vue, with backing from the two funds, would be one of the bidders for Cineworld ahead of a deadline set by the latter’s advisers later this week.
Listed in London and, like Vue, one of the UK’s largest cinema chains, Cineworld has filed for Chapter 11 bankruptcy protection in the US and is now holding a formal auction of its assets.
Last month, the company announced it would “undertake a marketing process to pursue a value-maximizing transaction for the Group’s assets, focusing on proposals for the Group as a whole.”
“Cineworld has not initiated and does not intend to initiate a separate marketing process for the sale of any of its assets on an individual basis.”
Shares of Cineworld are down 90% over the past year and the entire group now has a market value of less than £60m, a reflection of investors being wiped out with every sale.
The identities of other potential bidders for Cineworld were unclear on Monday.
Like the rest of the industry, Vue was hit hard by the pandemic and had to go through its own financial restructuring, which was completed just weeks ago.
Following a £470m debt-for-equity swap, the company’s balance sheet is now in robust shape, with founder Tim Richards publicly stating he wants to seize opportunities to consolidate the industry.
A Vue spokesperson said Monday: “Our focus at Vue remains on managing the strong recovery we are seeing in our business.
“While it would therefore be premature to speculate on any acquisitions at this stage, we are continually evaluating a range of potential opportunities.”
It’s thought Vue is probably most interested in owning Cineworld assets in a select number of countries, meaning it may have to line up buyers for those it doesn’t want.
The film industry has been buoyed by the recent release of hits such as the Avatar sequel, while two of the three biggest films in British history have been released in recent years – Daniel Craig’s final appearance as James Bond in No Time To Die and Spider-Man: No Way Home.
Last year’s debt-for-equity swap saw Vue’s existing Canadian pension fund shareholders, the Alberta Investment Management Corporation (AIMCo) and Omers, relinquish their ownership status.
They had taken control of Vue in a deal worth nearly £1 billion in 2013 and subsequently spearheaded a series of acquisitions that helped make the group one of Europe’s largest cinema operators.
In 2019 – a record year for Vue – they began exploring a sale, but failed to reach a deal before the COVID-19 crisis brought the leisure industry to its knees.
The recent financial restructuring also gave the company, which employs more than 8,000 people, access to £75 million in additional liquidity.
Mr Richards, who also chairs the British Film Institute, has spoken of the post-pandemic era becoming “the second golden age of cinema” as audiences flock to entertainment destinations.
Vue operates from some 230 sites and operates nearly 2,000 screens in nine European markets, including Germany, Italy and Poland.
The company was forced to lay off thousands of workers across the UK during the pandemic, with sites closed for months.
Mr Richards was also forced into a brief skirmish with Vue’s UK landlords as he sought rent reductions during the lockdown period.
In the UK, Vue is behind only Cineworld and Odeon in terms of number of sites.