French film groups Gaumont and Pathe - headed respectively by brothers Nicolas and Jerome Seydoux - are forming a joint venture to house their exhibition interests, EuroPalaces, which will be 66% owned by Pathe and 34% by Gaumont.
The new combine, which will be chaired by Pathe/Chargeurs' Eduardo Malone, will operate 700 venues in Europe and forecasts sales of $267.4m (FFr2bn) for 2000.
Both companies have suffered from the launch of UGC's loyalty pass, although Gaumont, which competes head on with UGC in Paris, has been hardest hit. Gaumont, which operates 370 screens in France, had a market share of 12.7% at December 1, compared to 15.6% for UGC with 340 screens.
Gaumont, which has also suffered from the dismal box office results of its $36m Cannes-opener Vatel, has already registered a $3.48m (FFr26m) loss for the first half of 2000. Following the merger, Gaumont will concentrate on its film production and distribution activities.
Pathe, which operates 219 screens in France and has an 8.8% market share, also operates a strong theatre network in the Netherlands and has development projects in Italy and Swizterland. EuroPalaces is expected to invest $401m (FFr3bn) over three to four years in the development of new venues, according to Malone, more than 50% of which will be in France, with the remainder in the Netherlands, Italy and Switzerland.
Jerome Seydoux described the UGC pass, which has been investigated by French competition authorities, as "an accelerator, making consolidation necessary". However he also pointed to the many recent examples of consolidation in the exhibition business across Europe, including the acquisition of the UK's Virgin Cinemas by UGC and the takeover of Germany's CinemaxX.
Pathe is currently negotiating an alliance with broadcaster TF1 concerning film catalogue and foreign sales activities and also has a partnership with StudioCanal in the film acquisition and distribution areas, both of which, Jerome Seydoux said, are not to be affected by the link-up with Gaumont.
The merger, which will have to be rubberstamped by the French authorities, is expected to be effective by mid-year 2001.