The wraps are finally coming off.
Reclusive financier Philip Anschutz, who’s previously granted only glimpses of a plan to collect disparate exhibition assets under a single corporate umbrella, on Monday unveiled his end game — a proposed $345 million initial public offering of an entity dubbed Regal Entertainment Group.
The company would oversee 5,885 U.S. screens now operated through individual circuits Regal Cinemas, United Artists Theaters and Edwards Theater Circuit. Anschutz controls about 17% of all U.S. screens, with Regal Cinemas operating 3,662 screens, UA almost 1,600 and Edwards the balance.
“This is an important milestone,” said analyst Kevin Skislock of Laguna Research Partners in Irvine. “Having so many theaters operating under one roof is, in my opinion, a home run.”
Earlier this year, Anschutz appointed Regal Cinemas topper Mike Campbell to oversee all theater operations at the three circuits and consolidated some field operations into Regal Cinemas’ headquarters in Knoxville, Tenn. (Daily Variety, Jan. 30). He also named UA Theaters boss Kurt Hall to a key administrative post, supervising operations including fledgling efforts to convert some screens to digital projection.
Regal Entertainment would be based in Denver, according to a newly circulated filing with the Securities and Exchange Commission. But operational HQ would likely remain in Knoxville under Campbell, with UA’s L.A.-based film buyer Mike Pade designated chief film buyer.
After Anschutz, L.A. buyout firm Oaktree Capital would likely be the second biggest stockholder in Regal Entertainment.
Oaktree acted as minority partner to Anschutz when the press-shy billionaire quietly bought up distressed debt at Regal and Edwards that by last fall he had converted to equity as part of a court-sanctioned bankruptcy reorganization. Anschutz flew solo in similar earlier moves to acquire UA.
Regal and UA are privately held, though both were once publicly traded. Edwards was a longtime family-owned concern before Anschutz took control last year.
Founded in 1989, Regal was taken private in a 1998 buyout by investment firms Kohlberg Kravis Roberts and Hicks, Muse, Tate & Furst. It’s believed the firms lost most of their combined $1 billion investment in the circuit. Loews Cineplex will have a small public float once its long bankruptcy reorganization is completed, but AMC Entertainment is currently the only major publicly traded exhib. AMC shares suffered after industrywide over-expansion a few years ago, but the stock has surged significantly in recent months.
The success of Anschutz’s IPO hinges on investors believing that exhibition is poised for a rebound, thanks to broad pruning of unprofitable theaters during bankruptcy reorgs. There’s also the notion that his large minority stake in fiber-optics networker Qwest Communications could speed Regal’s entrance into digital cinema.
The fledgling technology could facilitate the introduction of unconventional theater programming, such as concerts and sporting events, and that would also offer a nice fit with Anschutz’s portfolio of other businesses. In addition to exhibition assets and various film production and distribution outfits, his Denver-based Anschutz Corp. owns several arenas and sports franchises and produces music and sports events.
The regulatory filing for Regal Entertainment’s planned IPO didn’t specify how many shares would be offered, but Regal would use $180 million of the proceeds to repay bank debt at Edwards and use another $76 million to redeem preferred stock in the private company. The balance of proceeds would be tagged for general corporate spending, including acquisitions and working capital.
Plans call for the stock to be traded on the New York Stock Exchange under the “RGC” ticker symbol. Credit Suisse First Boston and Lehman Bros. are listed as underwriters of the Regal IPO.
(Bloomberg News contributed to this report.)