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Loews, Cineplex to merge
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September 30, 1997: 6:54 p.m. ET
Sony unit to get controlling interest in merged entity named Loews Cineplex
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NEW YORK (CNNfn) - Sony Corp.'s Loews Theaters unit has agreed to merge with Cineplex Odeon Corp. of Toronto, creating one of the world's largest theater chains, the companies announced on Tuesday.
Both companies will be combined into a newly created entity, tentatively named Loews Cineplex Entertainment, the companies said. The merged entity will have revenues of about $1 billion and operate over 2,600 screens in about 460 locations across North America.
Shareholders of the newly created company will include: Sony with 51.1 percent of the 452 million newly created shares; Seagram Co.'s Universal Studios, which was Cineplex's largest shareholder, with 26 percent; the Bronfman family trust with 9.6 percent; and public shareholders with 13.3 percent.
In conjunction with the deal, Universal will give the new company an $84.5 million cash infusion.
The new company is to be headed by Sony Retail Entertainment President Lawrence Ruisi, who will assume the title of president and chief executive. Cineplex's current president and chief executive officer, Allen Karp, will continue to run the Canadian operations.
The combined entity will have total debt of about $700 million. A person familiar with the deal said the combined entity's cash flow can easily support the debt.
Analysts said the new company can take advantage of cost-saving opportunities, including reduction of general and administrative expenses. In addition, Sony will likely close some Cineplex theaters with unfavorable lease arrangements.
More importantly, Loews Cineplex will have a leading market position, which could be used to give the company more bargaining power with film distributors, said analysts.
"The thing is that Cineplex has lost its market dominance. Distributors are able to raise the price on them. Now, they should be able to force film costs down as a percentage of revenue," said Dennis McAlpine, an analyst at Josephthal Lyon & Ross.
The companies said they expect the deal to close in about six months.
-- Robert Liu
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