The UK cinema sector witnessed its biggest shake-up for over a decade on Friday when private equity firm Terra Firma acquired both the Odeon and UCI circuits in one fell swoop.
The resulting estate, valued at approximately £580m and which is estimated to represent 35% of the UK's box office revenues, will almost certainly fall foul of the Monopolies and Mergers Commission (MMC) regulations concerning market share. Previous MMC reports on the exhibition sector set the limit of control of box office share by any single operator at between 25% - 27%.
However, as the combined circuits comprise a significant number of premium value high street locations, as well as outdated and non-profitable sites, it is likely that a 'cherry-picking' consolidation will result in an estate that falls within competition guidelines.
According to local reports, analysts have indicated that such restructuring would lead to regulatory clearance to retain the majority of the combined circuits' sites.
Odeon investor Robert Tchenguiz and US private equity group Blackstone are also reported to have made the final Odeon bid shortlist, while VUE Entertainment and BC Partners withdrew from the auction for Odeon in the penultimate round of bidding.
Other existing shareholders in Odeon, including Property entrepreneur Guy Dellal and Entertainment Film Distributors will be forced to sell their shares, according to the Times newspaper.
The current owners acquired Odeon from private equity firm Cinven for £430m in 2003. According to The Financial Times, Terra Firma paid £400m for the Odeon chain and £182m for the UCI circuit - which is understood to exclude the company's operations in Japan, Brazil and Taiwan.
The acquisition is the third such deal by Guy Hands' Terra Firma since it was established in March 2002. Previously, the company bought UK waste disposal firm the Waste Recycling Group for £531m in June 2003 and then the Shanks landfill operation for £227.5m earlier this year.