Newspaper article THE JOURNAL RECORD

Movie Theater Consolidation Leading to More Construction

Newspaper article THE JOURNAL RECORD

Movie Theater Consolidation Leading to More Construction

Article excerpt

NEW YORK -- The wave of acquisitions sweeping the movie theater industry may help operators speed up their plans to build large movie complexes, helping them attract more moviegoers and boost profit.

Theater companies have been struggling to finance the construction of more of the complexes, which can cost $25 million with high-tech projection and sound systems. The new owners, which include buyout firms and Sony, are bringing new financing to help build the theaters consumers are demanding.

That should be a boon for the industry. The big theaters can show hits such as Titanic on many screens at once, allowing them to pack in big crowds for the critical first few weeks. Moreover, the companies can cut costs by combining overhead and offer a wider selection of lucrative candy, snacks and drinks. "Multiplexes are the right way to go. You can serve more screens with less manpower, and they're much more of a destination for consumers," said Stewart Halpern, analyst at Furman Selz. As theater chains grow through acquisitions, their cost of capital declines, which makes building multiplexes and megaplexes less expensive, analysts say. And the bigger the theater, the more profit it can generate. Theaters with at least 14 screens generate 40 percent higher revenue and 130 percent higher profit per screen on average than theaters with less than 14 screens, said Kevin Skislock, senior analyst at L.H. Friend, Weinress, Frankson & Presson. That's because the big theaters tend to be in urban markets, where ticket prices are higher, and they have larger and more profitable concession stands selling a wide variety of food and drinks, he said. The trend toward fewer and larger chains has led many smaller operators to sell. Tuessday, Hicks Muse Tate & Furst and Kohlberg Kravis Roberts agreed to buy Regal Cinemas for $1.5 billion and combine their existing theaters to create the world's largest chain. Sony and Cineplex Odeon, moreover, plan to combine their theaters in a $1 billion transaction. That's helped drive up the stocks of other theater chains that some analysts consider the next takeover targets. AMC Entertainment, for one, has risen more than 10 percent the past week. …

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