Vue seeks new private equity backers

Vue, Britain’s third-largest cinema chain, is looking for new private equity backers in a deal that could be worth 400 million pounds ($627 million). Cinemas in Britain are owned predominantly by private equity groups: Terra Firma owns the largest group, Odeon, while Cineworld, in second-place, is owned by Blackstone.

(Reuters) – Like film studios, buyout shops seem fond of sequels.

The latest sees Vue seeking fresh private equity backers in a deal set to value Britain’s third-biggest cinema chain at 400 million pounds ($627 million) or more.

While at least six firms are circling, Vue chief executive Tim Richards will need to tell a gripping story about growth in a competitive and consolidated market.

Execution Noble analyst Geetanjali Sharma said any investor faced perhaps two years of “relatively muted growth and returns” in a fairly mature market. But the transfer to digital, and the chance to open new multiplexes in leisure parks, offered longer-term promise, she said.

Private equity dominates British cinema. Guy Hands’s Terra Firma [TERA.UL] owns top player Odeon and Blackstone-backed Cineworld Group is in second place.

Buyout firms’ longstanding affection for the silver screen rests on the industry’s power to generate cash and its seeming imperviousness to recession.

Barring 2002, last year was the best for cinema-going in Britain since 1971, the era of “Love Story” and “Airport”.

But there have been horror stories too: Under KKR and Hicks, Muse, Tate & Furst, top U.S. chain Regal over-expanded, went bust, and ended up in the hands of sports mogul Philip Anschutz.