Huge merger in Canadian theatre industry

meltdown75

Lifer
Nov 17, 2004
37,558
7
81
Hopefully this results in lower ticket prices for movie-goers:

Cineplex Galaxy buying Famous Players movie chain

TORONTO (CP) - Canada's top two movie theatre chains are linking up, with Onex Corp.'s Cineplex Galaxy LP buying larger rival Famous Players from New York-based Viacom Inc. for $500 million.

The long-rumoured sale, announced Monday, will create a film-screening juggernaut with 132 locations and more than 1,300 screens across Canada. And it will include about $36 million in capital lease obligations, Cineplex (TSX:CGX.UN) said in a release.

"Working in conjunction with Onex Corp., our largest unitholder 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," Cineplex Galaxy CEO Ellis Jacob said in a release.

To win regulatory approval, Cineplex Galaxy reached an agreement with the federal Commissioner of Competition to sell 35 theatres with combined annual box office revenues of about $100 million in cities where the two chains compete.

Those cities are Victoria, Vancouver, Calgary, Edmonton, Lethbridge, Alta., Saskatoon, Winnipeg, London, Ont., St. Catharines, Ont., Kitchener, Ont., Hamilton, Kingston, Ont., Ottawa, Toronto, Gatineau, Que., Montreal and Quebec City.

"Given the degree of concentration in the industry and the barriers to entry into the market, it is essential that these theatres be sold off to ensure that this merger does not result in a substantial prevention or lessening of competition," said Gaston Jorre, the Competition Bureau's senior deputy commissioner of competition.

The bureau said it examined the "full competitive impact" of the merger in local markets where the two chains competed, including DVD sales, pay-per-view and video on demand, "but concluded that the exhibition of first-run motion pictures continues to be a distinct product market."

Barriers to entry in the industry include the need to find suitable locations, costs associated with a specialized building and access to commercially valuable motion pictures, the bureau added.

There are numerous other film exhibitors in Canada. The major ones include Kansas City-based giant AMC Entertainment International Inc. which operates theatres in Ontario and Quebec; Vancouver-based Alliance Atlantis Cinemas, which operates theatres in that city, along with Victoria and Toronto; Montreal-based Cinemas Guzzo; Empire Theatres Ltd., which operates theatres throughout the Maritimes; Landmark Cinemas of Canada in Western Canada; and Magic Lantern Theatres in the Prairie provinces.

Last December, AMC - which operates 231 theatres with 3,560 screens in Canada, the United States, France, Hong Kong, Japan, Portugal, Spain and the United Kingdom - was privatized after being acquired by investment firm Marquee Holdings Inc. for $2 billion US.

If Cineplex Galaxy finds that it can't sell the 35 theatres it is supposed to dispose of, the bureau will appoint a trustee to do so and an independent manager will be appointed to oversee pricing and film booking for the theatres.

The sale is expected to close in the third quarter of this year.

"Once integrated, we expect this acquisition will be meaningfully accretive to our distributable cash flow," Jacob said.

The merger, which had been speculated for several months, brings together Famous Players with revenue of $520 million in 2004 and Cineplex Galaxy with revenues of $354 million.

Cash flow for the theatres to be sold was about $13 million in 2004.

Cineplex Galaxy said it plans to finance the transaction through a combination of borrowing and equity, with Scotiabank, RBC Capital Markets and National Bank committing to the financing.

Cineplex Galaxy LP was created in November 2003 in a partnership between Cineplex Odeon Corp. and Galaxy Entertainment Inc. and is 42 per cent owned by Cineplex Galaxy Income Fund (TSX CGX.UN). Global conglomerate Onex (TSX OCX) is the controlling unitholder.

In morning trading on the Toronto Stock Exchange, units of Cineplex Galaxy Income Fund were unchanged at $14.20, while Onex's shares gained three cents at $19.18.
 

sandorski

No Lifer
Oct 10, 1999
70,096
5,639
126
Originally posted by: 3chordcharlie
In what world would less competition lower prices?

Hell, more competition doesn't even mean Lower Prices. They are merging because Theatres are having a tough time, expect price increases for that reason alone.
 

K1052

Elite Member
Aug 21, 2003
46,021
32,980
136
Heh, just be glad Regal didn't buy it. Then you would really get screwed.
 

meltdown75

Lifer
Nov 17, 2004
37,558
7
81
Yep, plenty of crack. :roll:

It was speculated on CBC Newsworld that prices at the box office might lower as a result of this merger. I guess CBC is on crack too.

Anyway, thought some other Canadians might be interested. Guess not.
 

K1052

Elite Member
Aug 21, 2003
46,021
32,980
136
Originally posted by: meltdown75
Yep, plenty of crack. :roll:

It was speculated on CBC Newsworld that prices at the box office might lower as a result of this merger. I guess CBC is on crack too.

Anyway, thought some other Canadians might be interested. Guess not.

IIRC, Canadian ticket prices are still significantly above comparable US locations.

 

Stunt

Diamond Member
Jul 17, 2002
9,717
2
0
Originally posted by: meltdown75
Yep, plenty of crack. :roll:

It was speculated on CBC Newsworld that prices at the box office might lower as a result of this merger. I guess CBC is on crack too.

Anyway, thought some other Canadians might be interested. Guess not.
I saw the article on newsworld, they predicted there were savings to be made on the "popcorn bags"...wow! huge savings there!!

Although most of their revenues come from the ads (which i can't stand) and the food at the consession. CBC had an expert predicting a $11-13 ticket price.

I'm sorry but who's going to pay that. a) It's a sh!tty date atmosphere, can't talk, I'd rather go to a nice coffee house or loung for almost $30! b) The big screen and sound aren't going to make me want to go to the crap movies they've been releasing c) If a family wants to go, tickets and food could easily hit $100, wtf is that?! Do they only want preteens with nothing else to do there? Probably have to pay more in staff to keep them in line.

^^Reasons I usually don't go to the theatre.
 

cKGunslinger

Lifer
Nov 29, 1999
16,408
57
91
Originally posted by: Stunt
Originally posted by: meltdown75
Yep, plenty of crack. :roll:

It was speculated on CBC Newsworld that prices at the box office might lower as a result of this merger. I guess CBC is on crack too.

Anyway, thought some other Canadians might be interested. Guess not.
I saw the article on newsworld, they predicted there were savings to be made on the "popcorn bags"...wow! huge savings there!!

Although most of their revenues come from the ads (which i can't stand) and the food at the consession. CBC had an expert predicting a $11-13 ticket price.

I'm sorry but who's going to pay that. a) It's a sh!tty date atmosphere, can't talk, I'd rather go to a nice coffee house or loung for almost $30! b) The big screen and sound aren't going to make me want to go to the crap movies they've been releasing c) If a family wants to go, tickets and food could easily hit $100, wtf is that?! Do they only want preteens with nothing else to do there? Probably have to pay more in staff to keep them in line.

^^Reasons I usually don't go to the theatre.

Yeah, theaters (at least in the staes) are bad.

Over-priced tickets + obnoxious teenagers + exorbitant food prices + 15 minutes of commercials + crappy movie = not a fun time.

I enjoy the large screen and surround sound, but I have to make the matinee (after eating a meal) to justify the price. IMO, traditional movie theaters will eventually go the way of the drive in-theaters. No amount of $12 bags of popcorn can save them. ;)