Cinemas (Cineplex Merger, Empire Theatres, Rainbow)

[samsonyuen]

I wonder what they'll be selling? All the smaller older theaters, leaving behind all cinemas few people will want? Or will they have to sell some Silver City-style, large-scale cinemas? Anyone know which specific ones are being sold? I would think Rainbow Cinemas will want to buy some of the nicer ones, like they did with Fairview Mall. Some of the central Toronto ones might want be bought up by Alliance Atlantis, and the bigger ones might be bought up by AMC, I would think.
__________________________
Cineplex buys Famous Players
By TAVIA GRANT
Monday, June 13, 2005 Updated at 1:58 PM EDT
Globe and Mail Update

Cineplex Galaxy LP said it agreed to buy the Famous Players unit from Viacom Inc. for $500-million, combining Canada's two largest movie-theatre companies.

As part of the transaction, Cineplex Galaxy will comply with a Competition Bureau stipulation that the company sell 35 theatres with annual box office revenues of almost $100-million.

Last fall, New York-based Viacom said it planned to sell its Famous Players arm in Canada, the largest movie exhibitor in this country with a market share of about 40 per cent. For months, industry observers have seen Cineplex, with a 31-per-cent share, as a top contender for the unit.

“Working in conjunction with Onex Corp., our largest unit holder and controlling partner, we are bringing together two great companies and are creating an exceptional opportunity to build value through an improved cost structure and expanded product offerings,†said Ellis Jacob, president and chief executive of Cineplex Galaxy.

Cineplex Galaxy Income Fund holds about 42 per cent of Cineplex Galaxy LP, while Toronto-based leveraged buyout firm Onex and other shareholders hold the balance. Onex currently owns 31 per cent of the outstanding income trust units and has a 100 per cent voting interest.

Famous Players operates at 81 locations with 787 screens across the country, including theatres in its joint ventures with Imax Corp. and its partnership with Alliance Atlantis. Cineplex Galaxy operates or has an interest in 86 theatres with 775 screens across Canada in six provinces.

Canada's competition bureau gave a green light for the move, provided Cineplex sell some theatres. The theatres to be divested are in Victoria, Vancouver, Calgary, Edmonton, Lethbridge, Saskatoon, Winnipeg, London, St. Catharine's, Kitchener, Hamilton, Kingston, Ottawa, Toronto, Gatineau, Montreal and Quebec City.

“Our goal is to ensure that consumers continue to benefit from competitive prices and choice in the exhibition of first run motion pictures,†said Gaston Jorré, Senior Deputy Commissioner of Competition.

The move will leave Cineplex with 132 theatres in Canada. Remaining competitors in the movie-theatre landscape include AMC Theatres, based in Kansas City, Missouri, and the Rainbow/Magic Lantern movie chain.

The transaction, which includes about $36-million in capital lease obligations, is expected to close in the third quarter, subject to conditions.

Cineplex Galaxy plans to finance the transaction through a combination of debt and equity. Scotia Bank, RBC Capital Markets and National Bank Financial have provided commitments to finance the purchase price, the company said.

Last year, Famous Players had sales of $520-million while Cineplex Galaxy had sales of $354-million. Theatre level cash flow for the theatres to be divested was about $13-million last year.

“The Cineplex Galaxy management team has excelled in integrating businesses in the past and expects to realize significant operating synergies and improved EBITDA (earnings before interest, depreciation and amortization) from the combined companies as a result of this transaction,†said Mr. Jacob.

The companies hold a conference call to discuss the transaction at 11 a.m. EDT.

Units of Cineplex Galaxy Income Fund were unchanged at $14.20 in early trading in Toronto. Onex rose 7 cents to $19.22.

 

[spmarshall]

If Rainbow was to buy some of the locations, that would be sweet. I like the Market Square theatres, because they are a bargain.

Now that Schwartz/Reisman has control over the bookselling business, they can happily control most of the cinema business. I'm not looking forward to it - perhaps more Rainbow cinemas will be the only good thing.

Downtown, I'd predict the Carlton to be a casulty, especially as Metropolis is looking like it will actually be built again. There's a lot of marginal cinemas in the suburbs that might have stayed on, but have have a former competitor's SilverCity/Grande complex nearby. The only place I can think of on the top of my head where a new Cineplex and a Famous Players are very close each other is at Square One.

 

[samsonyuen]

Definitely, Rainbow has the high quality of Famous Player/Cineplex, but lower prices too. The Fairview Mall cinemas were pretty good, but FP closed them, and they were vacant for a couple of years before Rainbow picked them up. Off the top of my head, Square One has some really closely situated cinemas. I'm not sure if 401/Morningside and Scarborough Town Centre's Coliseum are too close. I think most of the downtown cinemas are pretty safe, it's pretty undercinema'd. Famous Players has only Paramount downtown. But Alliance Atlantis doing what they did with Cumberland would be pretty sweet. At Yonge and Eglinton, there's Canada Square south of Y/E, and a SilverCity north of Y/E, I think the small one goes. As for Yonge and Sheppard, there's the Grande, and the Empress Walk Silver City not too far away. I would think Empress Walk would go, since it's not at a major intersection, and is in a mall that is not as entertainment-oriented as when it opened, I'm not even sure how busy it is (Sportchek, Indigo, Tower Records left, and now are Fabricland, and Staples, and Future Shop).

I'm hoping a lot of the Coliseum/SilverCity format will stay, I like them more than Cineplex Odeon's theatres. They give more of an overall experience.

I really don't like that 75% of the Canadian cinema market will be dominated by one company. What will Schwartz and Reismann will hit next? Books, movies, I reckon they'll buy CTV, CBC and Global, or the Globe, Star and Post.
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From paperbacks to popcorn, power couple strikes again
By RICHARD BLACKWELL
Tuesday, June 14, 2005 Page A1
With a report by Marina Strauss

Toronto power couple Gerry Schwartz and Heather Reisman, who already sell the majority of books bought in Canada, have boosted their take of the country's entertainment dollars by creating its biggest movie theatre business.

Cineplex Galaxy LP, controlled by Mr. Schwartz's Onex Corp., announced yesterday it will gobble up rival movie theatre chain Famous Players Inc., to form a blockbuster business controlling almost two-thirds of the Canadian market.

Cineplex will pay about $500-million to U.S. media giant Viacom Inc. for Famous Players.

They are the majority owners of Indigo, by far the largest book retailer in Canada with more than 250 stores under the names of Chapters, Indigo, Coles and others, ringing up about $800-million a year.

After absorbing its rival, Cineplex will have about 1,300 screens in 132 theatres in six provinces, or between 60 and 65 per cent of the Canadian industry. The only market where the merged entity will have no theatres is Eastern Canada, which is dominated by the Sobey family's Empire Theatres Ltd. chain.

It's been less than five years since Mr. Schwartz and Ms. Reisman, who have a private movie theatre in their Toronto mansion, swallowed the struggling book chain Chapters Inc. and merged it with Ms. Reisman's smaller, ailing Indigo Books and Music.

The Cineplex takeover of Famous Players has some parallels to the Chapters buyout.

To get approval of the deal from the federal Competition Bureau, Cineplex had to promise to sell about 35 theatres in 17 cities where the combined company was deemed too powerful. Those theatres -- in cities ranging in size from Toronto and Montreal to smaller centres such as Lethbridge, Alta., and Kingston -- could fetch as much as $100-million, analysts say.

When Indigo bought Chapters, the bureau said the new company had to sell 23 stores to other booksellers. In the end there were no takers, and Indigo shut some outlets.

The movie theatre transaction has sharp contrasts to the book deal, however. Mr. Schwartz and Ms. Reisman bought Chapters with their own money, and Ms. Reisman is chief executive officer of the bookseller. Cineplex, on the other hand, is controlled through Mr. Schwartz's public vehicle, Onex, and he is not directly involved in managing it.

Onex got into the movie game in 1999, when it helped form the Galaxy Entertainment Inc. chain with the goal of setting up theatres in underserved small and medium-sized markets.

Then in 2002, Onex got control of the North American-wide Loews Cineplex chain while it was under bankruptcy protection. Later, the U.S. theatres were sold at a huge profit, Galaxy and Cineplex's Canadian operations were merged, and a chunk of the venture was sold to investors as an income trust.

The deal for Famous Players will be a "major transforming event," Cineplex chief executive officer Ellis Jacob said yesterday. The Famous Players brand will likely be retained at many theatres, although the Paramount name used in the biggest city-centre theatres will have to be dropped because Viacom owns it. Cineplex may sell the naming rights for some of those theatres to companies that would like to see their name on a high-profile venue, Mr. Jacob said.

Should movie-goers expect to pay higher prices because of Mr. Schwartz's stranglehold on the Canadian business? Not likely, Mr. Jacob said, "I'm not a proponent of ticket price increases." Howard Lichtman, president of Toronto marketing consulting firm Lightning Group, said movie theatres face so much competition from other forms of entertainment that it is difficult for them to boost prices.

 

[mark simpson]

"Some of the central Toronto ones might want be bought up by Alliance Atlantis"


Famous Players owns/did own 49% of AllianceAtlantis cinemas so I'd say no.

 

[samsonyuen]

They still do, but I think they might have to sell its stake. And it not being a majority shareholder, it could unload some smallery choice properties.

It looks like the Paramount will be changed to a Grande or Colossus, as it's a Viacom trademark. I think people will still associate it with its original name, like SkyDome.

Will this mean a boost to ticket prices?
_______________________________
Jun. 14, 2005. 01:00 AM
Cineplex swallows rival
Sale of Famous Players may boost price of tickets at some cinemas
RICK WESTHEAD
BUSINESS REPORTER

Cineplex Galaxy LP is swallowing its larger rival Famous Players in a $500 million deal that combines the two dominant players in Canada's movie theatre industry and could lead to higher ticket prices in some parts of the country.
After its acquisition of Famous Players from media giant Viacom Inc., Cineplex would have 167 theatres across the country, although the company said it has agreed to sell 35 cinemas to comply with government regulators. That would leave Cineplex with 1,300 screens in 132 theatres, representing about 63 per cent of the Canadian market.
Cineplex said it would pay $464 million in cash to Viacom and assume $36 million in capital lease obligations to buy Famous Players. The purchase is expected to close before October.
Theatre owners face fierce competition from video rental stores and cable TV companies, which increasingly add to their offerings of pay-per-view and video-on-demand choices. Cineplex said Canadian box office receipts fell 5.6 per cent from the comparable period last year.
Analysts have said a merger between Cineplex and Famous Players would allow the combined company to pare costs by reducing overhead.
"While the Famous Players brand will remain intact, investors should expect significant synergies (both cost and revenue generated)," Westwind Partners income trust analyst Ben Mogil wrote yesterday in a research note to clients.
In an April 13 note, Mogil had written that an acquisition of Famous Players might allow Cineplex, an income trust, to increase its distributable income per unit by 19 per cent.
Cineplex chief executive Ellis Jacob said in a conference call with analysts that the Toronto company would also reverse course on Famous Players' decision in January to cut ticket prices across the board.
The chain had cut admissions to $9.95 from $13.95. New owner Cineplex will convert Famous Players' uniform pricing to its current venue-by-venue model, Jacob said.
That means prices could rise in some locations, depending on the size of the market and demand for tickets.
A Cineplex spokesperson confirmed pricing at some Famous Players locations could rise, but added that "we don't have a one-size-fits-all" pricing model.
She pointed out theatres in large markets like Toronto typically charge high admission because they have significant operating expenses.
For example, while Toronto's Varsity Theatre charges adults $13.95 for evening showings, the Cineplex theatre in Medicine Hat, Alta., charges $6.99.
Jacob said the company may also consider renaming some of its larger cinemas in Canada's main media markets, a move he said would bolster advertising revenue.
"There is a huge opportunity with naming rights for large operations," he said. "More people go to (theatres) than they go to baseball and hockey arenas in Canada combined."
Viacom's Famous Players division currently operates under the Coliseum, Colossus, Paramount and SilverCity brands and last year generated $520 million worth of revenue.
By contrast, Cineplex, which runs Cineplex Odeon and Galaxy theatres, had revenue of $354 million, the company said.
The theatres Cineplex has promised to sell feature 284 screens with box office revenue of $100 million in cities such as Toronto, Hamilton and Montreal.
Box office revenue typically accounts for about two-thirds of the income generated by a theatre, with concessions accounting for most of the balance. Cineplex and others have recently bolstered their income by showing advertising before movie previews and features.
A Cineplex spokesperson said a list of theatres up for sale wasn't readily available, although Gaston Jorré, senior deputy commissioner of competition, mergers, said in a press release the bureau examined the "full competitive impact" of the merger in local markets where the two chains compete.
If Cineplex can't sell the theatres, the Competition Bureau said it would establish a trustee to complete the sale and hire an independent manager to book films and oversee pricing.
The bureau said it looked at alternatives such as DVDs, pay-per-view and video on demand, but concluded that showing first-run movies continues to be a "distinct product market."

 

[Ontarian1976]

I can see The Bay on Bloor St. closing (though I don't think I've actually ever been in it, so I don't know how busy it is).

As for the theatres, I think you'll see some of them close, and not just the older/smaller ones. The average Canadian only goes to the movies 3-4 times a year (it was something like 10-12 times a year many years ago), and with HDTV, On-Demand cable, and movies hitting DVD, PPV, and the movie channels more quickly now, I don't see that changing much. They overbuilt due to the competition between the "big 2" much like Chapters and Indigo overbuilt. I bunch of Chapters/Indigo stores ended up closing, and I think you'll see the same with the movies.

 

[blixa442]

Now that Cineplex owns Famous Players I wonder how it's going to affect 1BE since it longer makes sense to proceed with a new cinema across the street to compete with Varsity.

 

[SD2]

^^That's true. I think 1BE can handle more screens though, being a destination node. How's the project coming along, and how many screens was it to hold? With Uptown, York, Cumberland, and all the other cinemas that used to be there (can't remember all the names), it totalled 12 or so not including Varsity. I think the area could handle more screens, but Cineplex might not.

I think the area could handle more screens too...but Im not sure it would be cost effective to have them in two seperate locations.

Of course, with Metropolis finally on it's way Im sure they'll want to increase their theatre presence in the Yonge-Bloor area.

 

[Ed007Toronto]

And now AMC and Lowes Cineplex in the US are set to merge.

 

[officedweller]

Yup - Cinemark's sole Canadian location is in Vancouver.
It's not listed under international on their website, but with the US locations. They were going to open other locations around the Lower Mainland, but cancelled their plans.

Cinemark DOES have the best seats in town (like their slogan) - they're like the Famous Palyers high back stadium seats, but they tilt - to make up for the inability to slouch in the highback chair.

 

[samsonyuen]

Sobeys sees big picture in Cineplex deal
Empire Theatre gets screens beyond Atlantic region
By RICHARD BLACKWELL
Tuesday, August 23, 2005 Updated at 3:53 AM EDT
From Tuesday's Globe and Mail

Empire Theatres Ltd., a small movie chain based in Atlantic Canada, has broken out of its regional shell to become the second biggest movie exhibitor in the country.

Empire yesterday announced an $83-million deal to buy 27 theatres in Ontario and Western Canada from Cineplex Galaxy LP, the national giant that was forced to sell off a chunk of its business after it purchased Famous Players Inc. earlier this year.

Empire Theatres, a part of the Sobey family's Empire Co. Ltd. grocery and property empire, will now be able to draw on its parent's real estate savvy and financial clout to expand further, as it attempts to establish its new brand in the minds of movie goers across the country.

"We had been looking for an opportunity, or trying to find ways that we could expand beyond our Atlantic Canadian base," said Stuart Fraser, chief executive officer of Empire Theatres.

The chain already has 28 theatres and 177 screens in the four Atlantic provinces, so the addition of 27 theatres and 202 screens will more than double the company's national market share from about 6 per cent into double digits.

The only foray Empire Theatres had outside of Atlantic Canada was a small joint venture in four theatres with Western-based Landmark Cinemas of Canada Inc.

Still, Empire will remain far behind Cineplex Galaxy, which has 132 theatres, almost 1,300 screens and more than half of the Canadian market.

Empire Theatres will maintain its headquarters in Stellarton, N.S., keep the existing Cineplex theatre staff, and add a handful of operating executives in Ontario and the West to its management ranks, Mr. Fraser said. As part of its new wide-ranging empire, "we'll have a theatre in St. John's, Nfld., and a theatre in Victoria, B.C., so we'll find out how big the country is," he said.

Howard Lichtman, president of Toronto consulting group Lightning Group and a movie marketing expert, said Empire has all the key components for success in the theatre business: knowledge of the industry, knowledge of real estate, and financial backing.

"The movie theatre business today is as much about real estate and financing as it is about films," Mr. Lichtman said.

Operating on a bigger scale also will give Empire Theatres more clout when it comes to negotiating with film studios and distributors, Mr. Fraser said, and will allow the company to attract new employees and executives.

The company will analyze each of the Cineplex theatres and figure out which ones need to be renovated or replaced with new cinemas, he said. Then it will keep an eye out for other new properties it can add profitably to the chain. "We're going to run the business very much as a going concern and a growing concern."

Empire Theatres was able to expand in one fell swoop because the federal competition bureau made Cineplex divest 34 of the properties it picked up in the Famous Players acquisition, which closed in late July.

Empire bought everything that was on the table except seven theatres in Quebec. Those are expected to be sold in the next few weeks, Cineplex said yesterday.

Mr. Fraser said the Quebec theatres "just weren't of interest to us" because of the small number and their locations.

Despite doubling in size, the theatre group is still a tiny part of the overall Empire empire. In the fiscal year ended May 7, the movie business brought in about $74-million in revenue, compared with $229-million from its real estate group and $12.2-billion from the grocery chain, which includes the Sobey's, IGA and Price Chopper brands.

Mr. Fraser acknowledged yesterday that the movie industry has been suffering this year, with box office income down sharply from 2004. But he said he is confident of a turnaround.

"Really, right now we have not had very good movies that can attract an audience," he said. " Whenever we get into this situation, the naysayers come out and

• all the reasons why people don't go to the movies, [but] there will be some very solid movies coming this fall, which will bring back our audience."
  
  Over all, Mr. Fraser said, "if we weren't optimistic, we wouldn't be investing in the theatre business."
  
  Analyst Ben Mogil of Westwind Partners Inc. said the $83-million price Cineplex got for the theatres was higher than many people had expected. Mr. Mogil had projected Cineplex would get between $90-million and $100-million for all the divested theatres. When the Quebec locations are sold the total price will likely be at the high end of that range, he said. Cineplex will use the proceeds to pay down debt it incurred when it bought Famous Players for about $500-million.
  
  Trust units in Cineplex Galaxy Income Fund, which owns about 43 per cent of the operating arm, rose more than 3 per cent yesterday to close at $16.09 on the Toronto Stock Exchange.
  _____________________
  Empire Theatres Limited announces the acquisition of 27 theatres in Ontario and Western Canada
  
  STELLARTON, NS, Aug. 22 /CNW/ - Empire Theatres Limited ("Empire
  Theatres") announced today that it has agreed to purchase 27 theatres with 202
  screens located in Ontario and Western Canada from Cineplex Galaxy LP
  ("Cineplex"). The transaction is valued at approximately $83 million and is
  expected to close September 30, 2005, subject to customary closing conditions.
  Stuart Fraser, President and CEO, Empire Theatres Ltd said "we are
  pleased with this acquisition as it enables us to further expand our presence
  across Canada beyond our core group of theatres located in Atlantic Canada. We
  look forward to operating these theatres and introducing the Empire Theatres
  brand to Ontario and Western Canada." Empire Theatres will offer existing
  staff continued employment in these theatres.
  Empire Theatres currently operates 28 theatres representing 177 screens
  in Atlantic Canada including one IMAX theatre in Halifax, NS along with 4
  theatres representing 24 screens via a joint venture in Western Canada. As a
  result of this acquisition, including the joint venture, Empire Theatres will
  operate 59 theatres representing 403 screens across Canada.
  Cineplex entered into a consent agreement with Canada's Commissioner of
  Competition in connection with the Famous Players acquisition requiring the
  sale of 34 theatres with a total of 282 screens located in the regions of
  Ontario, Western Canada and Quebec. The purchase by Empire Theatres represents
  27 of these 34 theatres.
  A complete listing of the theatres being purchased has been attached to
  this press release.
  
  About Empire Theatres Limited:
  Empire Theatres is a 100% owned subsidiary of Empire Company Limited with
  its corporate headquarters in Stellarton, NS. Empire Theatres is committed to
  offering a terrific cinema experience to its customers by offering modern
  complexes and amenities along with branded food choices. More information can
  be found at www.empiretheatres.com.
  Empire Company Limited is a public company traded on the Toronto Stock
  Exchange (symbol EMP.NV.A). Empire's key businesses include food distribution,
  real estate and corporate investment activities, including theatres. More
  information can be found at www.empireco.ca.
  
  About Cineplex Galaxy LP:
  Cineplex, headquartered in Toronto, ON operates or has an interest in 132
  theatres with 1,278 screens (after giving effect to the 34 theatres and 282
  screens to be divested pursuant to a consent agreement with the Canadian
  Commissioner of Competition) and is the largest motion picture exhibitor in
  Canada. Cineplex is a public company traded on the Toronto Stock Exchange
  under Cineplex Galaxy Income Fund (symbol CGX.UN). More information can be
  found at www.cineplexgalaxy.com or at www.famousplayers.ca.
  
  
  Ontario Region
  
  Cineplex Odeon Showcase Cinemas Famous Players Jackson Square Cinemas
  3325 Harvester Rd. 2 King St. W.
  Burlington, ON Hamilton, ON
  
  Cineplex Odeon Orleans Town Centre SilverCity Kitchener
  250 Centrum Blvd. 135 Gateway Park Dr.
  Orleans, ON Kitchener, ON
  
  Cineplex Odeon Exchange Centre Famous Players Kings College Cinemas
  111 Albert St., 3rd Floor 262 King St. W.
  Ottawa, ON Kitchener, ON
  
  Cineplex Odeon Elgin Mills Famous Players 8 Wellington
  10909 Yonge St. 983 Wellington Rd. S.
  Richmond Hill, ON London, ON
  
  Cineplex Odeon Square One SilverCity St. Catharines
  100 City Centre Dr. Pen Centre Shopping Mall
  Mississauga, ON 221 Glendale Ave.
  St. Catharines, ON
  
  Famous Players Capitol Theatre Famous Players Rideau Centre Cinemas
  223 Princess St. 50 Rideau St.
  Kingston, ON Ottawa, ON
  
  SilverCity North York
  5095 Yonge St.
  North York, ON
  
  
  Western Region
  
  Famous Players Capitol 6 Cineplex Odeon Granville Cinemas
  805 Yates St. 855 Granville St.
  Victoria, BC Vancouver, BC
  
  Cineplex Odeon Oakridge Famous Players Esplanade
  601 - 650 West 41st Ave. 200 W. Esplanade
  Vancouver, BC N. Vancouver, BC
  
  SilverCity Guildford Coliseum Calgary
  15051 - 101st Ave. 100 - 16061 Macleod Trail S.E.
  Surrey, BC Calgary, AB
  
  SilverCity Country Hills Famous Players Gateway 8
  388 Country Hills Blvd. N.E. 2950 Calgary Trail S.
  Calgary, AB Edmonton, AB
  
  Cineplex Odeon Clareview Town Cineplex Odeon
  Centre Edmonton City Centre Cinemas
  4211 - 139th Ave. 10002 - 102nd Avenue
  Edmonton, AB Edmonton, AB
  
  Paramount Theatre Lethbridge Famous Players Westmount Centre
  4th Ave. and 8th St. S. Cinemas
  P.O. Box 520 2003 Westmount Shopping Centre
  Lethbridge, AB 111 Ave. and Groat Rd.
  Edmonton, AB
  
  Famous Players Capitol 4 Cinemas Cineplex Odeon Grant Park
  216 1st Ave. S. 1120 Grant Park Ave., Unit 127
  Saskatoon, SK Winnipeg, MB