Chinese Billionaire After Terra Firma’s Odeon


September 28, 2015


Private equity firm Terra Firma is looking for a buyer for the Odeon cinema chain. Sunday’s papers reported that its likely buyer might come from China. The historic cinema chain has caught the attention of Wang Jianli, the Chinese business tycoon.


Terra Firma’s Role in Charge of Odeon
Terra Firma acquired the cinema chain in 2004. At the time the private equity firm paid around £400 million for the group. It then merged it with the rival UCI chain in order to turn around the group’s profits. In 2004, the chain also attracted interest from other private equity firms, including the US giant Blackstone Group.


Odeon had been making heavy losses, but has recently delivered better results. The first half of 2015 saw the chain deliver a pre-tax profit of £14.5 million.


Reports inside the city suggest the private equity firm has started a process of selling the chain. This wouldn’t be the first time Terra Firma looks to exit Odeon, having tried to sell the chain in 2011. The private equity firm didn’t manage to attract a bid of £1.2 billion it was looking for.


But the chain’s competitive position has improved in recent months and The Telegraph suggested Terra Firma’s founder and owner Guy Hands is looking to capitalise on this improved potential.


Dalian Wanda Eyes the Chain


Sunday’s report by The Telegraph suggests that Wang Jianli’s leisure and property empire, Dalian Wanda, is after the chain. The group is no stranger to cinema chains, having bought the US chain AMC three years ago. Dalian Wanda bought the AMC chain in a deal worth £1.7 billion including debt.


More recently, it acquired the Australian cinema group Hoyts. That deal was worth £400 million. It’s also in charge of the largest cinema operator in Asia, taking advantage of the booming cinema industry.


While Odeon’s screens are mainly located in the UK, Dalian Wanda would also become a key player in Spain, Italy and Germany with the buyout.


What About Valuation?

Considering the private equity firm didn’t manage to attract its proposed valuation last time, The Telegraph suggested the ‘financial muscle’ of Wanda might be the key in any potential bidding war.


Last month, some reports suggested Vue, Odeon’s rival cinema chain in the UK, could bid around £600 million for the chain. But this was considered to be “an absolute non-starter”, especially in the light of the recent stock listing of Cineworld. Vue has also looked at acquiring the company in 2013, but never launched any serious bid.


It is likely the private equity firm won’t consider selling at lower than around £1 billion. Considering the chain has managed to increase its revenue by 17% at the start of the year and nearly doubling its market growth, it is likely, there will be a few potential buyers.


It remains to be seen whether the Chinese business tycoon manages to make another big splash in the cinema industry and whether Terra Firma gets a bid it likes. In the meantime, you can find private equity deals and news through the DealMarket platform.

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