Odeon cinemas put up for sale

<p>The owner of Odeon cinemas has placed an asking price of £1 billion on its head.</p>

The future of Odeon and UCI cinemas is set to change after the chain's owner announced plans to put it up for sale.

Private equity group Terra Firma is seeking around £1 billion for the franchise and wants to start the sales process by May. It has also suggested that it may float the cinema chain on the London Stock Exchange instead of putting it up for sale. It comes at a time when Odeon has experienced a significant downturn in operations.

In April 2014, the chain announced that profits before interest, tax and other charges for 2013 had fallen by 24 per cent to £69.2 million. This was compounded by a five per cent drop in sales to £706.7 million. It is the second time that Terra Firma has tried to sell Odeon/UCI since purchasing the chain in 2004.

At that time it paid €650 million (£475 million) for Odeon and €350 million for UCI and merged the two companies. In 2011, it attempted to sell the newly-formed franchise but withdrew after bids failed to come close to its £1.2 billion valuation.

Terra Firma believes that overseas investors will be key to selling the cinema chain.

Guy Hands, chairman of Terra Firma, said: "We are likely to appoint banks by May. Possible buyers could include US cinema groups or South American cinema firms, and private equity groups from Europe, the US, and China."

Cineworld increases competition

Odeon's struggles have been combined with the expansion of rival Cineworld. The UK's largest cinema operator announced a deal in January that will see it take over around 100 multiplexes in eastern Europe and Israel. The cash and shares deal, valued at about £500 million, has been described as "an exciting and unique opportunity" for the company.

Cineworld will take over premises previously owned by Cinema City International which has cinemas in the likes of Poland, Bulgaria, Hungary and Israel among others.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.