Imax order for Regal after swallowing Cobb

TORONTO — Regal Cinemas Inc., the third-largest exhibition company after swallowing Cobb Theaters, has ordered 10 Imax 3-D theater systems to be built as part of its new multiplexes over the next five years.

The deal is the single biggest theater-signing in the history of Imax Corp., the Toronto-based pioneer of large-screen movie technology, and represents its largest commitment from an exhibitor. No financial details have been disclosed.

Most of the theaters will be Imax’s new 3-D SR systems, unveiled just six weeks ago. With 270 seats, SR theater systems are smaller than conventional Imax theaters and are intended for multiplex installations in mid-sized urban centers. The SR system costs about two-thirds less to build than a conventional Imax theater.

A conventional Imax theater requires the support of a population base of 1 million or more. The SR should be able to thrive on half that size.

“Obviously, this is important to Imax financially, but more important than the financial value (of the deal) is the strategic value and the validation of this new product,” Imax chairman Bradley Wechsler said in an interview.

Under the terms of the deal, Regal will lease six of the theater systems from Imax, and four will be joint ventures between the two companies. The first ones will be built in Dublin, Calif., Lincolnshire, Ill., and New Rochelle, NY., with two slated to open in 1998.

Imax-watchers welcomed news of the deal. Financial analyst Marina Kunis, who follows the exhibition industry for Bear Stearns & Co. Inc. of New York, upgraded her recommendation on Imax stock, and raised her earnings estimates.

Imax shares rose $1.37 to $22.63 on the Nasdaq Stock Market Tuesday on volume of 107,600 shares. On the Toronto Stock Exchange, Imax gained $1.25 (Canadian) to $31 on 48,665 shares traded.

Regal, based in Knoxville, Tenn., operates more than 1,400 screens in 20 states. Last week, it announced the acquisition of the 643-screen circuit of Cobb Theaters, headquartered in Birmingham, Ala., giving it more than 2,100 screens at 235 locations.

“We are very excited about the synergies of operating Imax theaters in our multiplexes,” Regal president Mike Campbell said in a prepared statement. “The average attendance of an Imax screen is several times larger than that of a conventional movie screen, thus substantially increasing the attendance and visibility of our multiplexes.”

Imax theaters operate at 50% to 70% capacity, partly because they draw a daytime crowd, compared with the industry average of 15% to 20%.

“There have been two strategic impediments to Imax becoming a really large and substantial entertainment company,” Wechsler said. “One was the cost of our theaters and, two, our product had to be more commercial. This cuts the capital cost of an Imax theater considerably once you nest it into a multiplex. It opens up the marketplace dramatically.”

Movie theater chains are spending hundreds of millions of dollars to boost market share, and every company is trying to differentiate itself from competitors, Wechsler said. “Imax helps to do that.”

Prior to the deal, Imax had 48 theater orders in its sales backlog.

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