HOLLYWOOD — Cinemark has signed a definite agreement giving Chicago investment firm Madison Dearborn Partners a majority interest in the privately held exhibitor in a deal worth $1.5 billion.
Pact, believed to include about $500 million in debt assumption, when finalized will cash out the Cypress Group investment firm, which has held a 45% stake in the Dallas-based circuit.
Cinemark chairman-CEO Lee Roy Mitchell — who will continue in his posts along with other top management — will also relinquish an unspecified portion of the 55% interest he has held in the movie chain.
“After a long and productive relationship with the Cypress Group, we are now looking forward to our new partnership with the principals of Madison Dearborn,” Mitchell said.
Madison Dearborn managing director Benjamin Chereskin called Cinemark “one of the pre-eminent competitors in the motion picture exhibition industry.”
Cinemark operates 3,142 screens in the U.S. and Latin America. Its majority sale to Dearborn — which is expected to close in April — concludes an auction that drew broad interest among financial-sector investors but not from other exhibs.
Still, the auction apparently caught the attention of current owners of rival exhib Loews Cineplex, who now are similarly investigating a possible auction. Many observers believe that future transactions may see actual mergers of rival circuits, as the domestic exhibition industry continues a recent consolidation trend.
“We maintain our bullish view on the group and believe that near-term catalysts — such as additional M&A transactions, an improving (first quarter) box office and a strong summer box office schedule — could help drive the stocks higher over the coming months,” Banc of America Securities’ Michael Savner wrote in a research note on the Cinemark deal. “We also think the box office is gaining momentum heading into the important summer release season.”