South African Media Group Primedia and Kersaf Investments have sold their cinema interests, Ster Century Europe, in Hungary, the Czech Republic and Slovakia for $18.5m.
The cinemas were bought by UCI Central Europe BV, a joint venture between United Cinemas International (UCI) and venture capital and private equity fund Argus Capital Group. The joint company was established in the late 90s to develop multiplex cinemas in Eastern and central Europe, but under the present arrangement, UCI's involvement is limited to the provision of management and operational services for the eight cinemas.
The unprofitable Ster Century has long been a financial thorn in Primedia's side. Ster Century Europe (SCE) will apply the net disposal proceeds from the sale to reduce its existing $30m loan facility with South Africa's Standard Bank, which will in turn reduce the guarantee commitments of Primedia.
The agreement of terms for the disposal of SCE's cinema interests in Hungary and the Czech Republic was for a cash consideration of $16.7m, with completion expected by April 2002. The sale of its Slovakian cinemas was for $1.8m, with completion, subject to Slovakian competition clearance, expected by June 2002.
William Kirsh, CEO of Primedia, said: "This is a positive move for Primedia and represents good value for shareholders. The early settlement of a large proportion of the loan facility with Standard Bank will allow Primedia to significantly reduce its exposure to contingent liabilities in respect of Ster Century Europe. In addition, the sale will facilitate a further reduction in central overhead costs and an improvement in operational efficiencies, with Ster Century Europe now operating in five territories rather than eight."
Kirsh continued: "Going forward, Ster Century Europe remains sufficiently well-capitalised to ensure the roll out of the remaining four cinema sites in the UK and Greece." He also intimated to the press that the split of the group into two separate entities Filmco and Adco, as announced last July, was unlikely to take place
Following a recent review of Ster Century Europe's operations subsequent to a management shake-out, and a poor trading performance largely due to new cinema openings, the Board of Ster Century Europe have recommended a further impairment charge of $19m, of which Primedia's share will be 40.6%.
While the Kersaf Group is believed to be pursuing a strategy of divesting its exhibition investments, SCE currently retains its cinema interests in the UK, Ireland, Greece, Spain and Poland.