Details few as Cineplex topper explains strategy
TORONTO — Allen Karp, president of Cineplex Odeon Corp., set out the rationale for the company’s proposed merger with Sony Corp.’s Loews Theatre Group at the annual meeting in Toronto Thursday, but stayed tight-lipped about the talks.Cineplex confirmed last week that it was in discussions with Sony Retail Entertainment Inc., the Sony unit that operates Loews’ 900 screens. Cineplex executive vice president Howard Lichtman told reporters after the meeting that top-level negotiations are continuing in New York and Toronto. Karp told the meeting he couldn’t comment on the discussions and then went on to say why they were so important. “A new merged entity with a solid financial base and combined management strength and vision would enjoy a strong foundation for significant growth in both North America and internationally,” he said. Under the terms of the merger transaction being considered, Loews would join with all existing Cineplex shareholders — including the Bronfman family trust, Universal Studios Inc. and public shareholders — in the combined entity. Any transaction would be subject to shareholder approval and regulatory approval in both Canada and the United States. Canadian Heritage Minister Sheila Copps said she plans to use the review process to extract a commitment from Cineplex on screening Canadian films. Karp said he could give no assurance that an agreement would be completed. Whatever the outcome of the talks, Cineplex is moving ahead with plans to open 200 new screens in 1997 — 50 by the end of the second quarter and the others mostly in the fourth quarter. Another 200 screens will be opened in 1998. It currently operates 600 screens at 125 locations in Canada and 895 screens at 186 locations in the United States. Cineplex’s $331 million debt is high when set against cash flow, Karp said. “Our focus, however, is and has to be on growth and not debt reduction as we meet the challenges of intensifying competition.” He noted that the industry added more than 1,700 new screens in North America last year. North American box office reached a record $5.9 billion last year, a gain of 7.6% from 1995. Admissions increased 6% to 1.3 billion tickets sold, representing the highest attendance in 37 years.