Madison gets majority interest in Cinemark

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.

‘Pre-eminent competitor’

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.”

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