Oaktree, Onex pony up for GC

Conglom, buyout firm could control nearly 10% of U.S. screens

A Toronto conglom and a Los Angeles buyout firm, already partnered for a takeover of giant exhib Loews Cineplex, Wednesday announced an agreement to buy smaller General Cinemas for $36.6 million in cash and $114.3 million in debt assumption.

Move by Onex Corp. and Oaktree Capital reps continued the dramatic turnover in ownership of major U.S. circuits. Oaktree figures in a number of such scenarios, including, most recently, bids to take control of ailing Edwards Theatres in Southern California and nationwide arthouse operator Silver Cinemas.

Onex topper Gerald Schwartz recently alerted shareholders of the conglom — whose Galaxy Entertainment owns some theaters in Canada — that he intended to acquire more U.S. screens, in addition to those operated by Loews. His proposed takeover of that New York-based movie chain, which earlier included now-departed L.A. entrepreneur Gary Winnick, was bolstered Tuesday when a bankruptcy court judge nixed a rival takeover move by a creditors’ group.

Onex and Oaktree would gain control of almost 10% of all U.S. screens by acquiring majority holds on both Loews and General Cinemas.

Chapter 11 recourse

All of the current takeover scenarios involve Chapter 11 bankruptcy reorgs, with several exhibs using such proceedings to shutter older, money-losing properties following an industrywide building binge that has left circuits reeling from a major debt hangover. But in the case of General Cinemas and parent GC Cos., its October Chapter 11 filing stemmed not from inordinate multiplex construction but the effect on its operations from such expansion by rivals.

General Cinemas, headquartered in Chestnut Hill, Mass., ranks at No. 11 among U.S. exhibs by screen count, with 677 screens in 73 theaters in 20 states. GC also operates 17 theaters with 160 screens in South America.

Trading in GC shares was halted prior to the announcement of the takeover proposal, after falling 4¢ to $2.41 on Tuesday. The shares, which a year ago traded in excess of $27, had sunk to a 52-week low of $1.31 by last Dec. 4 as investors spanked the stock over exhib difficulties in general and GC woes in particular.

An acquisition by Onex and Oaktree would take the company private. The partners hope to secure bankruptcy court approval of their GC proposal by October.

Loews deal in review

In their proposed Loews takeover, Onex and Oaktree agreed to an $850 million deal featuring only about $100 million in new capital and delivering an 88% stake in the circuit. The proposal is bogged down in review by holders of Loews bank debt, with Loews working toward a mid-October deadline for filing a final reorg plan.

Onex and Oaktree would replace Loews’ current majority owners, Sony and Universal Studios. The studios would get nothing from the transaction, but they previously wrote off much of their Loews holdings.

Meanwhile, No. 1 U.S. exhib Regal Cinemas also is expected to file for Chapter 11 eventually. Oaktree has partnered with entertainment entrepreneur Philip Anschutz to buy up most of the chain’s debt, effectively setting up a presumptive reorg bid for Regal.

Anschutz, who previously acquired a majority stake in United Artists Theatre Circuit, also is partnering with Oaktree on its Edwards bid. If successful in all the pending situations, Anschutz would be poised to control perhaps one-fifth of all U.S. exhibition.

Though Oaktree figures in at least as much of the takeover action as Anschutz, it’s believed the firm has a more short-term strategy in mind. The firm commonly buys up distressed assets in an array of industries in the hopes of reselling the businesses at a profit.

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