Hoyts in talks with Pacific Equity Partners about acquisition

Hoyts CEO Damian Keogh. Picture: Britta Campion

Hoyts is understood to have held talks with the cinema chain’s former owner Pacific Equity Partners to test its appetite for a potential acquisition of the business.

While Credit Suisse is working to find a buyer of Hoyts, it is understood that there is no formal sales process underway.

The understanding is that PEP was approached to test its interest in an acquisition, but the private equity group is only interested at a price.

It is believed that as part of the plan, the Hoyts Group president and chief executive Damian Keogh would be involved with the proposal in a management buyout structure.

Mr Keogh ran PEP when it owned Hoyts in the past.

Unfortunately for PEP, the price aspirations for Hoyts’ by Chinese owner Dalian Wanda are high – thought to be over $1bn – which would likely be way beyond what the Australian based buyout fund would be prepared to pay.

A sale of Hoyts has been on the cards since the start of the year, as first flagged by DataRoom, as Wanda looks to sell assets to drive down its debt closer to home.

Hoyts’ listed parent company, Wanda Film Holdings, is listed on the Shenzhen Stock Exchange and valued at just over $7bn.

Prior to the global pandemic, Hoyts was said to be generating as much as $150m of annual earnings before interest, tax, depreciation and amortisation.

The pandemic wiped out about 70 per cent of its earnings, and most expect one of the hardest hit parts of the business is its Val Morgan cinema advertising offering.

With expectations of making a recovery over the next two years, the company is believed to have hope of returning to a triple figure EBITDA number.

In recent weeks, Wanda had been trying to refinance Hoyts through advisory firm Gresham, say sources, but some believe that lenders were not forthcoming when it came to providing funding on favourable terms and a sale was instead considered the preferred option.

Dalian Wanda Group, controlled by billionaire Wang Jianlin, purchased Hoyts from Pacific Equity Partners in 2015 for what was thought to be a deal worth $US750m.

PEP had bought the cinema chain in 2007 for a price that valued the business at $440m.

Hoyts operates at least 430 screens across Australia and New Zealand and rental machines in 650 locations, along with the Val Morgan cinema screen advertising operation, which is the leading national supplier across Australasia.