Palace Cinemas says it isnegotiating to purchase the Hollywood Multiplexes in Budapest owned by Andy Vajna'sproduction, distribution and exhibition company InterCom.

Neither Palace Cinemas nor InterCom would comment on the price, date of handover,number of facilities involved or whether the purchased cinemas would remain inoperation.

Admissions have beendropping precipitously in Hungary last year, from 15.2 million in 2002 to 12.1 millionin 2005, according to National Film Office statistics.

In February, Palace Cinemas general director V.J. Maurytold that theexhibition market was not growing and that it was unlikely that moremultiplexes would be built in the country.

InterCom was the top exhibitor in Hungary in 2005, with 3.4 million admissions. The companycurrently operates 10 multiplexes in Hungary, five of them in Budapest, with a total of 69 screens and more than 10,000seats. InterCom also operates a 10-screen multiplexin Bucharest, Romania.

Palace Cinemas currently hasfour multiplexes in the Hungarian capital, two of which it purchased inNovember 2005 from Budapest Film, and a total of 47 screens. In 2005, PalaceCinemas saw roughly 2 million admissions.

Presently the two companiesaccount for slightly less than half of Hungary's 32 multiplexes, which attracted 3.9 millionadmissions in 2005.