NEW YORK — Unhappy with the offers it has received since putting Cinamerica/Mann Theaters on the auction block in January, the exhib’s owner is now considering bringing in another chain to manage the 374-screen circuit in hopes it could sell at a higher price in the future.
Investment firm Warburg Pincus, which bought Mann in late 1997 for roughly $165 million, appears willing to consider the proposal as an alternative to the huge write-off it will have to take if it accepts one of the cash offers currently on the table.
The highest bid for Mann has come from a group led by former Mann CEO Jeff Lewine, the exec backed by Warburg when it first acquired the chain in 1997. That offer is believed to be well below $100 million.
But rival Southern California-based theater circuit Pacific Theaters, which made an even lower cash bid for Mann back in February, is believed to have made an alternative offer to take over operation of the circuit.
The deal would likely guarantee an option to buy the circuit at a pre-determined price, contingent on an improvement in Mann’s earnings.
While a Warburg spokesman declined comment, the Pacific offer has apparently begun to look better to the LBO firm, which has so far been unable to hammer out a deal with Lewine.
Lewine’s intended backers, a Florida real estate development group, recently dropped out of the deal, according to sources. Lewine is now working with another group of investors in hopes of reaching a deal with Warburg in the coming weeks.
No chief at helm
In the meantime, the Mann chain is foundering without a seasoned chief executive at the helm.
For instance, the circuit decided at the last minute not to make a traditional deal to play the highly anticipated “Star Wars: Episode I — The Phantom Menace” at its flagship Chinese Theater in Hollywood or its high-profile Village Theater in Westwood.
Instead, 20th Century Fox “four-walled” the pic in both locations for just four weeks, before shifting it to rival theaters in those zones. The last-minute shakeup put summer schedules at the key theaters into disarray.
“Usually at the Chinese you end up making one person happy and two people angry,” observed one industry pro. “They somehow came up with a decision that made three people angry, and they didn’t get the best of the deal. It’s as bad as you can get.”
Were it to accept Lewine’s bid, Warburg would lose its equity in Mann while some of the lenders, which include Canadian Imperial Bank of Commerce, would also lose some of their money.
Observers said it made sense for Warburg to consider holding onto Mann for the moment while it has another exhib run the company for a year or two in the hope that its performance could be improved.
“You could do a lot better than the money you are being offered for that circuit,” said one industry exec, noting that its film-buying policies could be dramatically improved.
Mann has plans to build a number of multiplexes in Los Angeles, including one adjacent to its world-famous Chinese Theater and another in Westwood. Those developments could have a significant impact on the circuit’s future cash flow.
Having another exhib manage Mann would also sharply reduce its overhead.
But observers also noted that a management deal could turn out to be a headache for any circuit that takes over Mann.
“When you buy something, it’s yours and you can do whatever you want with it,” said one exhibition veteran. “A management deal is a lot more cumbersome. There’s always someone who says, ‘Why didn’t we do it this way?’ ”
The exec also emphasized, “You only have so much political capital in dealing with the movie companies and other suppliers. The question is: How much do you want to expend on a management deal?”
Distributors are keeping a close watch on the latest developments to see who will end up controlling the Mann chain.