GC sets screen sale

General Cinema to sell screens

NEW YORK — Seventh-biggest theater exhib General Cinema has put about one-quarter of its circuit on the market, Wall Street sources say.

GC is understood to have hired Donaldson Lufkin Jenrette to sell about 300 screens at roughly 50 theaters in the South and Southwest, including Texas, Louisiana, Tennessee, Georgia and Florida. Neither GC nor DLJ returned calls seeking comment.

If successful, the sale would reduce GC to a circuit of about 860 screens concentrated in the Northeast, reducing its influence at a time of consolidation in the exhibition world when most of the major exhibs are striving to get bigger. As of Jan. 31, GC had 1,148 screens at 175 theaters.

Wall Street sources say the theaters now on the market are the same group that GC tried to sell two years ago without success. Sources say that at that time, the exhib was asking too much money and consequently it withdrew the theaters from the market out of dissatisfaction with the offers it received.

Prices for theater companies are thought to be at a peak right now, with recent deals such as Kohlberg Kravis Roberts’ acquisition of Act III Cinemas and KKR-Hicks Muse’s joint acquisition of Regal Cinemas setting the high benchmark. General Cinema’s parent, GC Cos., likely thinks it could get better prices now.

DLJ is sure to be promoting that view. The firm advised Act III’s owners, which include veteran TV producer Norman Lear, on its sale, and since then has been actively trying to do more theater deals, Wall Streeters say. DLJ was not involved with the attempted sale two years ago.

Others on Wall Street and in the industry are not so sure GC will get higher offers this time. One banker said the theaters are spread across so many markets that it is unlikely any one buyer would do a deal for all of them, so GC will be forced to negotiate market by market.

That makes it hard to assess how much GC could get in the sale, although one source said $150 million would be the maximum for the group.

More important, the sale is sure to fuel questions about GC’s strategy in exhibition. While the exhib is building some screens in its core markets in the Northeast, the company management appears to be just as focused on its equity investment portfolio as on growth in exhibition.

Uncertainty about GC’s strategy has hurt it on Wall Street, although the general enthusiasm for exhib stocks has helped send GC stock to highs recently. It closed at a recent high of $52.50 Wednesday.

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