Cinema City acquires Palace Cinemas in Central Europe. Cinema City becomes #3 cinema operator in Europe
Today Cinema City International (WSE ticker: CCINT) announces that it has acquired the Palace Cinemas’ chain, comprising 141 screens in 15 multiplexes in Hungary, Czech Republic and Slovakia. The purchase price for the transaction was €28 million. This acquisition significantly strengthens CCI’s position in the Hungarian and Czech markets and adds Slovakia to CCI’s countries of operation.
CCI acquired 100% of the equity in 4 companies from the Palace Cinemas (Central Europe) BV (“Palace Cinemas”). These 4 entities operate 8 multiplexes with 65 screens in the Czech Republic, 4 multiplexes with 47 screens in Hungary and 3 multiplexes with 29 screens in Slovakia. The purchase price represents a multiple of 6x the “normalized” EBITDA of the acquired companies for 2010. The transaction was simultaneously signed and closed and was not subject to any third party or regulatory approvals.
“Today we took a major step forward on our path to consolidating our position as one of the leading cinema operators in Europe. This acquisition brings the total number of our screens to 866 and the number of multiplexes to 90. In addition, we entered into our seventh territory, Slovakia, with three premiere locations in the capital city, Bratislava,” said Moshe (Mooky) Greidinger, CEO of CCI, the largest multiplex cinema operator in Central & Eastern Europe and in Israel. Mr. Greidinger added, “We welcome the Palace employees and customers into the Cinema City Group, and we are excited to do our best to provide Palace’s loyal customers with the very best experience in cinema.”
Pursuant to the transaction agreement CCI acquired the following subsidiaries of Palace Cinemas: Palace Cinemas Czech s.r.o., Palace Cinemas Hungary Kft, Palace Cinemas Slovak Republic s.r.o. and Palace Multikino s.r.o. The purchase did not include the Palace Mozi, Kft company in Hungary, which operates 5 multiplexes in Budapest and 3 multiplexes outside of Budapest. CCI has agreed to provide selected management services to Palace Mozi’s cinemas.
The €28 million purchase price represents a multiple of 6X the normalized EBITDA of the acquired companies as stated in Palace Cinemas’ 2010 management accounts. Normalized EBITDA primarily represented the EBITDA of the existing multiplexes and the annualized EBITDA of the multiplexes opened in 2010. At the closing, CCI paid € 21.4 million to the seller and assumed €6.6 million in existing debt of the acquired companies. The acquisition was financed from CCI’s existing cash and from available credit lines.
CCI acquired 141 screens in 15 multiplexes: 8 multiplexes with 65 screens in the Czech Republic (plus 1 multiplex with 8 screens under development in Ostrava, planned to be opened in 2012), 4 multiplexes with 47 screens in Hungary and 3 multiplexes with 29 screens in Slovakia. (A full list of the acquired cinemas is presented in the appendix to this press release.)
Aggregated results of Palace Cinemas
Moshe (Mooky) Greidinger further commented: “In the next two years we plan to invest in the acquired cinemas to upgrade their standards and to add a sufficient number of digital screens to meet what we expect will be the ongoing demand for 3D digital movies. In the Czech Republic and in Hungary, we intend to integrate our organizations, applying our longstanding business model and management tools, which we anticipate will deliver meaningful added value to our overall operations in these markets. We believe this integration will also benefit our cinema advertising business.”
Cinema City International is the largest multiplex cinema operator in Central & Eastern Europe and in Israel. CCI operates 90 multiplexes with 866 screens, in 7 countries (Poland, Czech Republic, Hungary, Romania, Bulgaria, Slovakia and Israel). There are 35 more multiplexes under development, which will add approximately 360 new screens. In addition, CCI is actively involved in cinema related advertising and in film distribution.
In 2010 CCI sold 30.5 million tickets in six countries, 11.1% more than in 2009. The CCI group employs over 4,000 people in 7 countries.
Palace Cinemas was founded by Arthur Goldblatt and V.J Maury with financial backing provided by Argus Capital Partners L.P. (“ARGUS”). ARGUS is one of the largest and most experience independent private equity funds focusing on the region of Central and Eastern Europe. ARGUS is supported by leading institutional investors and family offices from Europe, North Americ, the Middle East and Japan. With total commitments in exces of €400 million in its funds, ARGUS has invested in sixteen companies in the region, including many leading and well-recognised businesses. Through its eight regionally based investment professionals (Poland, Czech Republic, Hungary, Romania and the UK) ARGUS provides buy-out and expansion capital financing to the sellers of companies and management teams wanting to develop their businesses further.