Canadian investors acquire Vue cinema chain for £935m

The sale, to OMERS Private Equity and Alberta Investment Management Corporation, will more than double Doughty’s original investment and is expected to close by late July, Doughty said in a statement yesterday.

The buyout firm paid £450m to buy Vue in December 2010, and then embarked on an expansion drive beyond the chain’s UK home market, including acquisitions of rivals in Germany and Poland.

Cinema ticket sales have remained strong in recent years, despite the recession sapping consumer spending power, with big box office hits such as James Bond film Skyfall and Batman flick The Dark Knight Rises boosting sales last year.

This, combined with a shift to new digital technologies, has helped cinema operators to improve their profit margins.

“As a leisure activity cinema going is very resilient, and it’s always proved itself to be very resilient,” Wayne Brown, an analyst at Canaccord Genuity, said. “The box office is doing very well and has benefited a lot from 3D technology.”

As a rough estimate, Brown says Doughty is selling Vue at over nine times earnings before interest, taxes, depreciation and amortisation – more than the eight times at which listed rival Cineworld is currently trading.

Together with Odeon & UCI – set to be put up for sale or readied for an initial public offering by its private equity owner Terra Firma – Vue and Cineworld run around 70 per cent of UK cinema screens between them.

According to the Cinema Exhibitors’ Association, UK box office revenues rose 5.9 per cent to £1.1bn in 2012.

The purchase of Vue by two deep-pocketed Canadian funds suggests the cinema chain will continue to build market share by acquisitions across Europe, Brown said.

Mark Redman, senior managing director and head of Europe for OMERS Private Equity, said the new ownership gave Vue “the distinct advantage of patient capital and deep pockets for organic and acquisitive growth”.

For Doughty, the sale marks its second realisation from its fund V.