Multiplex Merger Mania

December delivered not one but two Christmas cinema crackers — a proposed $2.1billion acquisition of Canada’s Cineplex by Cineworld and Cohen Media Group’s purchase of Curzon. With more consolidation
likely this year and beyond, Patrick von Sychowski examines merger mania in the exhibition sector.


I DON’T THINK THAT CONSOLIDATION we are seeing among the larger exhibitors (and to a lesser extent to date on the distribution side of the house in studios) is unique to our industry,” commented Phil Clapp, head of the UK Cinema Association and president of UNIC, when CT contacted him for his take on the subject. “Rather it is something seen in many mature industries where organic growth alone does not provide the benefits achievable through consolidation (or at least not to an acceptable timescale). Those benefits of course involve efficiency savings on ‘back office’ functions, but also the increased negotiating power that comes from being a larger player in the market.” Cineworld more than any seems to embody this ‘efficiency savings’ drive. In December it raised its ‘synergies’ goal from $150m to $190m for Regal, citing “significant improvements in contractual terms and elimination of excess costs.” In January it was announced that Regal would follow Cineworld’s lead in switching from Coca-Cola to Pepsi, only the most prominent of brand and supplier ‘harmonisations’ across the Atlantic.

Clapp is confident, however, that we will not just see large and uniform cinema brands in the future. “While mergers and acquisitions of the scale seen recently grab headlines, more general growth and investment in the cinema experience means that if anything its diversity will continue to expand,” he predicts. “I see diversity of offerings — not just film content, but also experiences and environments — continuing to grow.”

He points to the different focuses that has seen Everyman grow its comfy couches proposition across the UK, Odeon its Luxe recliners and Cineworld its 4DX sites. “At its core [cinema] will remain the unbeatable social experience of seeing a film in a room with a bunch of strangers, but how that is presented, and how it is linked with other social experiences, will continue to develop.” This is not just a UK trend. “Nothing I see across many European territories suggests that the public’s appetite for that is anywhere near exhausted,” Clapp notes.

Yet the most significant mergers in 2020 might not be in Europe or the Americas, but China. With box office growth slowing from double-digits to 5.4% in 2019 in mainland China and the spread of Coronavirus seriously impacting exhibition, several local cinema chains are feeling the heat.

Already in 2018, mounting debts of $60m in unpaid wages and rent forced SMI Holdings to suspend operation of 140 of 320 sites. The company still hasn’t recovered its financial footing and could be the most high profile target of any M&A activity.

There is a chance the biggest deals might be in cinemas you wouldn’t necessarily have heard off. Below is a guide to those that might find themselves on the block this year.


10 to watch in 2020

These are the ten cinema operations to keep an eye on this coming year, in terms of M&As or changes of ownership. Some of these have signalled publicly that they are available to buy, while others look likely as strategic acquisition opportunities. Yet with almost no truly large chains (think over 1,000 screens) left to buy, the time is starting to run out for mega(plex) deals.

  1. India Carnival Cinemas: Given the high stock market valuation of Indian multiplex majors PVR and INOX, they are likely to be unaffordable for an outsider to swoop in and nab. With the country’s #3 Cinepolis India already being part of an international exhibition major, this just leaves Carnival as a prime target for anyone wanting to establish a major presence in India. While Carnival is supposed to be buying Novo, it may well end up itself being the target of an overseas acquisition.
    WHY: India is the world’s largest cinema market in terms of tickets sold each year, with a buoyant domestic film industry. While it has not grown as fast as China, growth has been sustainable and there is still a lot of scope for expansion.
  2. USA/Latin AM: Cinemark International – With Wanda having effectively merged AMC and Carmike and Cineworld proposing much the same with Regal and Cineplex, this leaves Cinemark as the only one of the original Top 5 cinema operators in USA/Canada that is now still domestically controlled. However, with its geographical footprint across both North and South America, it represents an interesting target. Theoretically Marcus, Harkins, or National Amusements could be an easier target, but they are all family-run operations that probably would have already sold out if they wanted to.
    WHY: Cinemark is large and has a foot in both the mature North American and the growing Latin American cinema markets. It will soon be the only major cinema operator in North America that is not controlled by either Wanda or Cineworld. The company is well regarded and considered to have good management.
  3. NIGERIA/GHANA Filmhouse/ Silverbird – Anyone looking to get a head-start in the billion-strong African market could do worse than invest in one of the two major operators over in West Africa: Silverbird Cinema or Filmhouse. This is not an investment with quick or immediate pay-off, but with the second IMAX multiplex opening in Nigeria (there are already two in Kenya), there is clearly the potential for long-term growth in the continent with the world’s youngest population.
    WHY: Although these are the smallest of all the cinemas listed in terms of actual screens (Silverbird has 65 across 10 sites, while Filmhouse has one more site and plans for 25 in total) their long-term potential is huge. Audiences in Nigeria and West Africa have a proven taste for film and the rise of the middle class and malls creates demand for cinemas.
  4. China Golden Village – Flush with cash from the sale of its mainland China cinema network, Hong Kong’s Orange Sky Golden Harvest (OSGH) bought out a 50% stake from Australia’s Village Roadshow in a deal worth $129m. This created a unified ownership structure that could enable OSGH to spin or sell off the GV cinema operation to focus on film production or other media.
    WHY: While GV is established in mature Asian cinema markets (Hong Kong, Taiwan and Singapore), cinema-going in Singapore in particular is still expanding. It is also affordable enough to be part of a larger network across South-east Asia.
  5. AUSTRALIA/NZ Village Cinemas – Village Roadshow was the subject of a $517m takeover bid by Pacific Equity Partners last year. This includes not just Village Cinemas, but also Village’s Australian studios (home to “Thor: Ragnarok”, Aquaman,” and other big titles), a distribution operation and theme parks. The feeling is that these could be worth more if broken up and separated.
    WHY: The cinema business would be a relatively easy and quick stand-alone sale. Village competes with Wanda-owned Hoyts and Event (which is selling its German CineStar to Vue) in Australia and New Zealand. This means that potentially anyone from Cineworld to Cinepolis could come knocking.
  6. Poland Hellos Cinema – Helios is a part of Polish print and publishing conglomerate Agora. It competes with Vue’s Multikino and Cineworld’s Cinema City but tends to be spread out more, with presence in mid-size towns. Expansion has meant the chain has been a drag on the parent company (usually it’s the other way around with print companies), but unlike Sweden’s Bonnier selling off SF Bio (now part of Odeon/AMC), there has been no indication from Agora that it is looking to divest its exhibition business.
    WHY: Poland is Central Europe’s largest cinema market and continues to grow strongly. Vue and Cineworld would not be able to buy it on competition grounds, so this leaves the door open for other chains to make an audacious offer.
  7. MALAYSIA GSC/ MBO – Malaysia’s largest cinema chain Golden Screen Cinemas (GSC) let it be known in 2016 that it was up for sale and discussions were held at the time with Korea’s CJ CGV. Ultimately, the Koreans had to issue a statement in December that year explaining that they had no intention to buy GSC, with people familiar with the discussions saying the parties were too far apart on price. Since then there has been no mention of a further sale, but once for sale, most likely still for sale. If the price tag on GSC is too high, perhaps Mr International Cinema Buyer would be interested in their smaller rival MBO at a much more affordable price.
    WHY: With neighbouring Thailand, Vietnam and Indonesia are already dominated by big international players. Malaysia is the only territory in Southeast Asia with a large single-country cinema operator. The market is dynamic and still growing, not least with the states of Perlis and Kelantan being the only territories on earth without cinemas, now that even Saudi Arabia has allowed them.
  8. UK The Light Cinemas – If you were to design a cinema chain to be a tasty acquisition morsel, then it would probably end up looking a lot like the UK’s The Light cinemas. This new entrant has bought, refurbished and sprung up a series of low-cost but high-design multiplexes, in rock-solid locations such as Sheffield, Bolton, Stockport, Bradford and elsewhere. The company is still expanding, but is sufficiently well regarded to sit nicely in a larger international configuration, at least for someone ready to compete with Cineworld, Odeon and Vue on their home turf. The Light has shown that it can be done.
    WHY: With a portfolio of 10 sites, the operator has reached critical mass in terms of sale-ability. It might also help that its management has close ties to the Saudi Muvi exhibition operation.
  9. France/Belogium UGC – It would take a brave international cinema operator to step in and buy a major cinema chain in the country that lays claim to inventing cinema and treats it as an art and not just a business. Yet of the three big French chains (Gaumont-Pathé, CGR and UGC) it is UGC that would be the most obvious target. Analysts also agree that the market is ripe for a shake-up, with Kinepolis making small in-roads from Belgium and and no bigger consolidation than CGR’s purchase of Cap’Cinema in 2018 and Gaumont Pathé buying Luc Besson’s cinemas the year before.
    WHY: France remains Europe’s largest cinema market by revenue and cinema is firmly entrenched as a cultural activity. Because of the lack of overlap with other major European circuits, it would make it relatively easy for anyone other than its two French competitors to buy it. But… it is French.
  10. UK/Europe/Taiwan – VUE INT – The sale of Vue seems to have been longer coming and even more delayed than the “Avatar” sequels. Rumours about a possible sale or IPO have been swirling for years, but in the summer of 2019 it was revealed that Vue would be for sale —with a price tag of over £2billion. That would value the operator at around twice what AMC paid for Odeon Cinemas and still more, even if the Nordic Cinema Group acquisition was factored in. Several industry insiders have baulked at this valuation, particularly at a time when Vue has attracted criticism from its rivals for its ticket price cutting strategy.
    WHY: There is no larger circuit currently available for sale. This means there are few potential buyers, unless a smaller cinema chain wants to do a reverse-takeover, as Cineworld did with Regal. The price is likely to be a deterrent even to anyone who fancies giving Tim Richards and co. a big pay day.