U.S. exhibs still shopping
Bud Mayo’s Digital Cinema Destinations (Digiplex) has jumped into the exhibition buying spree with a deep-pocketed partner that’s committed $20 million to help run and expand his new and growing chain. In their first foray together, Digiplex and Start Media are acquiring seven West Coast theaters from UltraStar Cinemas for $13 million.
Digiplex, which is rolling out an all-digital network theater by theater, said the deal will add 74 screens, six in Southern California and one outside Phoenix. It will close at the end of the week and expand the company’s locations to 16 from nine, with a total of 159 screens in Pennsylvania, California, Connecticut, New Jersey and Arizona.
Deal consists of $8 million in cash plus about 910,000 Digiplex Class A shares at $5.50 per share — about five times the theaters’ annual cash flow.
Start Media’s initial $10 million capital contribution to the j.v. will provide the deal cash plus closing and renovation costs. Publicly traded Digiplex has the stock.
Digiplex will initially hold 35% of the venture with the right to go up to 50%. It will be the exclusive manager of the theaters under long-term contracts for fees estimated to exceed $1 million per year, it said. It will collect cash from the theater operations after management fees and a 6% preferred return to Start.
Alan Grossberg, CEO of UltraStar, called Digiplex “very well-respected pioneers of digital cinema (that have) developed an intriguing and ambitious growth strategy. As stakeholders, we look forward to sharing in the rewards of their future success.”
Digiplex chairman-CEO Mayo called the deal “a logical next step for Digiplex as we continue to successfully execute our strategy of opportunistically expanding the company’s footprint across the U.S.”