The sale of Showcase Cinemas’ 16-venue UK circuit to cinema chain The Light has hit a major stumbling block.
Screen understands The Light’s property investment partner, reported earlier this year to be Mike Ashley’s Frasers Property Group, made a last-minute attempt to renegotiate the agreed price due to challenges around the property portfolio, believed to be in the £55m region.
Showcase, owned and operated by Harbor Lights Entertainment, responded by putting the cinemas back on the market.
Harbor Lights, previously known as National Amusements, is the Ellison family company that also holds 100% of the Paramount Skydance Corporation class A common stock.
Showcase Cinemas have been up for sale since last summer following Paramount’s merger with Skydance.
Earlier this spring, UK outfit The Light looked poised to buy the circuit, which operates more than 200 screens across its 16 venues.
Both sides are estimated to have incurred significant consultancy fees, possibly as much as £1m each, in the due diligence process and putting a deal in place. But it is understood that the deal has now unravelled.
“The amount of time it is taking highlights the cautiousness of UK investment and the challenges with the Showcase business,” one unnamed source close to The Light told Screen.
Showcase has sites in cities including Nottingham, Reading, Leicester, Liverpool and Leeds as well as a 17-screen venue in Kent’s Bluewater shopping centre.
The Light operates 13 sites and the deal would have made the company the UK’s fourth-biggest cinema circuit operator.
Greidinger in the frame
The Light has another potential backer and is trying to rescue the deal. But several sources indicate industry veteran and former Cineworld head Mooky Greidinger is pushing hard to take over the circuit.
It is understood the UK’s three major circuits, Vue, Odeon and Cineworld, are not in a position to take over Showcase because of UK competition rules. They might be able to cherry-pick four or five selected venues, but Paramount reportedly wants “to sell the whole thing, not bits and pieces,” as one source observed.
Exhibitors are divided over the prospect of Greidinger’s return to UK exhibition three years after he stepped down from Cineworld as the exhibition giant emerged from bankruptcy.
Many would welcome his return. Some view him as an old-fashioned showman with a passion for running cinemas. “It’s in his blood. It’s a family business and has been for generations,” said one.
However, others have warned that if Greidinger takes over the Showcase venues, he will inherit a circuit that “has not seen any love for eight, nine, ten years”.
Cost challenges
Greidinger is known to have been in discussions with different financiers about raising funds for a possible Showcase takeover.
“Whoever inherits that circuit is going to have to spend so much money to bring it up to scratch. They have got some seriously underperforming sites, and not many are making money because they are so old,” said a rival exhibitor.
“Whatever you pay for Showcase, be prepared to pay another 50% for upgrading the estate because there are a lot of old Sony 4K projectors. They were the first to go with recliners, which is great, but they have been in there for a long time now. All of those sites will need a serious upgrade to compete with what Vue, Cineworld and Odeon are offering,” said an analyst.
Showcase, though, is also acknowledged as an innovative operator. It owns 11 sites; a further five are on lease.
Another attraction is that UK exhibitors are having a bumper summer. “With Spider-Man: Brand New Day and The Odyssey, if you hung a sheet in your backyard, you’d sell tickets,” said one boss of a rival chain, speaking off the record. “We are at 90% occupancy. We put on shows at 8am and 12.30 at night, and we are getting 80% occupancy at these times.”
With business as brisk as this, it is understandable why interest remains in the Showcase chain, despite the cost challenges. There could also be interest among property developers given the large number of freeholds available despite an increasing wariness in the sector about cinema as a real estate investment opportunity.
In June, Harbor Lights sold the Showcase Cinemas US circuit encompassing 13 cinemas in Massachusetts, New York, Ohio and Rhode Island to European operator Kinepolis Group.
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