NEW YORK — Cineplex Odeon Corp. confirmed Friday it was “in discussions” with Sony Theatres about a possible merger, but it warned that no deal had yet been reached and any deal would have to undergo regulatory scrutiny both in the U.S. and Canada.
As reported (Daily Variety, June 19), Sony Corp. is expected to spin off its theater group into Cineplex in exchange for a controlling interest in the combined company.
Cineplex said in Friday’s statement that “under the terms currently being considered, (Sony’s Loews Theaters) would join with all existing Cineplex Odeon shareholders in the combined entity.” Cineplex declined further comment and Sony execs did not return calls.
Wall Street sources said the talks were still very preliminary and that Cineplex only confirmed their existence because reports of the negotiations in the past two days had begun to affect Cineplex’s stock price, necessitating some sort of public statement from Cineplex.
Cineplex’s stock rose 12¢ to $1.87 Thursday and jumped to a high of $2.12 Friday, although it eased back to close unchanged at $1.87.
The combination of Sony and Cineplex would have close to 2,500 screens at 450 locations, making it the second-biggest exhibitor, just behind Carmike Cinemas. Natwest Securities analyst Gary Farber said the merger had some strategic benefits, including the ability to negotiate lower film rental costs and to squeeze operating efficiencies out of its combined circuit.
But the merger may face antitrust challenges as the combined company would have a commanding presence in the New York and Chicago markets, an issue which has already aroused concerns among distributors. Farber suggested the company could avoid an antitrust problem by selling off some theaters in those markets.