Viacom's Famous Players Theatres and Alliance Atlantis Communications have taken a combined 21% stake in Galaxy Cinemas, the newest player in the Canadian exhibition market.

The joint venture, announced Thursday, calls for the construction of 21 state-of-the-art multiplexes over the next 30 months, all of them in smaller markets with population bases of between 50,000 and 150,000 people.

Galaxy, which has yet to screen a film, was formed in 1998 by Ellis Jacob, former chief operating officer of exhibitor Cineplex Odeon. At the time of creation, Galaxy had the backing of Canadian billionaire Gerald Schwartz's Onex Corp. along with personal investments by former Alliance head Robert Lantos, Alliance Atlantis' Victory Loewy and Jacob. The quartet were members of the board of Alliance before its merger with Atlantis. Onex Corp. holds an interest in Mike Medavoy's Phoenix Pictures.

Galaxy stands to benefit from its two new investors. Famous Players is mid-way through a $500m expansion plan that has seen another 392 screens open across 31 sites. The participation of Alliance Atlantis, the country's most prolific distributor, should see a vast increase in the range of films available in markets previously under-served. Canadian films should get a boost.

Jacob, who left Cineplex Odeon at the time of its merger with Sony's Loews exhibition chain, made his initial foray with the purchase of seven sites to be demolished and replaced by new facilities.

Two sites are presently under construction in the province of Ontario: an 11-screen complex in Peterborough, and a 12-screener in Sault Ste. Marie. Both are expected to open in May.

According to Ken Prue, director of marketing and communications at Galaxy, the company has three "firm" deals to build facilities in suburban Edmonton, Alberta (10 screens), Brantford, Ontario (10 screens) and Midland, Ontario (7 screens) and is close to deals in two other smaller Ontario markets, Owen Sound and Cornwall. The sites in Sault Ste. Marie and Cornwall, both border-town communities, will look to tap US customers as well.

After the latest investment, Onex and its partners will end up controlling 63% of Galaxy, Famous Players 12%, Alliance Atlantis 9% with the remaining 16% held by various other entities. Famous Players and Alliance Atlantis have an option to increase their stake to a maximum of 35%, but Onex will not dilute its position.