Sydney independent cinema chain United Cinemas has made an approach to buy rival Hoyts in the past month, sources say.
United Cinemas operates cinemas in Opera Quays, Warriewood, Collaroy, Avalon, Narellan and the Blue Mountains and is owned by businessman Roy Mustaca.
The approaches come after Credit Suisse last year was working to sell Hoyts. The timing could now be right for a deal.
A buyer is likely to be keen to capitalise on a recovery in the cinema industry following lockdowns in the past two years to curb the spread of Covid-19.
Hoyts is owned by Chinese group Dalian Wanda and has been keen to sell the cinema chain for about two years.
The challenge cementing a sale has always been its lofty price expectations.
It is unclear whether United Cinemas has made any progress with its initial acquisition attempts, which sources say may have been in conjunction with a private equity firm.
DataRoom first reported in February last year that Hoyts was exploring opportunities for a sale, as Dalian Wanda remained under pressure to reduce debt. The group had Credit Suisse working on a potential divestment, and Gresham was also involved in a recapitalisation plan.
Hoyts refinanced $550m worth of loans with Japanese bank Nomura over a five-year term. The former owner of Hoyts, Pacific Equity Partners, was understood to have been approached up to two years ago, but was not a keen buyer at the asking price, which was then said to be more than $1bn.
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 with coverage of more than 2000 cinema screens.
Dalian Wanda is controlled by billionaire Wang Jianlin. It purchased Hoyts from Pacific Equity Partners in 2015 for what was thought to be a deal worth $US750m. PEP had bought Hoyts in 2007 for a price that valued the business at $440m.
Hoyts’ listed parent company, Wanda Film Holdings, is listed on the Shenzhen Stock Exchange and valued at $6.5bn.
Wanda Cinema is China’s largest private cinema operator with more than 150 multiplexes in 80 cities.
It was previously a major shareholder in North American cinema chain AMC Entertainment, which underwent a $US917m financing to ward off bankruptcy in the past few years.
Before the 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 in 2020, with one of the hardest-hit parts of the business Val Morgan.
Hoyts has had hopes to triple its EBITDA on a recovery.
Cinemas have been hard hit during the pandemic.
BGH Capital bought rival cinema business and theme park owner Village Roadshow in 2020 for $586m.
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