CVC and Elliott Want a Piece of Cineworld

It’s never the best sign when activist investor Paul Singer is knocking on your door.

Private equity firm CVC Capital Partners and Singer’s hedge fund Elliott Management both made offers to buy parts of the failing movie theater business, Cineworld – the second largest theater chain on the planet – according to Sky News.

Franchise Fatigue

“The death of cinema” has been in the cultural zeitgeist ever since Netflix became the first streaming success story, forever changing how people watch movies and TV. But while streaming was a perpetual snag for Cineworld, COVID was a backbreaker for the England-based company. Only a few years prior it had bought US-based Regal Cinemas, acquiring its 560 theaters and taking on its $4 billion debt. At the time, the purchase could be argued as a healthy expansion, but that was before the global pandemic.

In September of last year, Cineworld filed for Chapter 11 bankruptcy with the goal of securing an all-cash sale for everything it owned to pay off its creditors and shareholders. That included roughly 750 locations across the UK, the US, Israel, and central and eastern Europe. Unfortunately, the wholesale, all-cash offers never came, and Cineworld’s final bid deadline is only a few weeks away:

• CVC and Elliott are interested only in the Cinema City and Yes Planet locations in Europe and Israel, respectively. Cineworld’s US and UK locations make up the bulk of its debt and lease liabilities of $8.8 billion.
• Both groups have made recent leaps into the leisure and entertainment sectors in the past few years. CVC owns pieces of the Six Nations rugby tournament and Away Resorts, and Elliott owns Barnes & Noble.

A source close to the bankruptcy process told the Financial Times, “It’s not a stupid idea to think of selling off part of the business to reduce the amount of new capital required” when the “company emerges from bankruptcy in the coming months.”

Movie Meme Magic: While things may look grim for Cineworld, AMC has had a unique journey thanks to Wall Street experts on Reddit. In January 2021, AMC achieved meme stock status. By the end of the year, it had raised $2 billion through stock sales. And while things have cooled down considerably since then, it meant that AMC survived the pandemic without having to file for bankruptcy. So maybe Martin Scorcese and Christopher Nolan’s dreams will come true someday and we’ll all go back to regularly watching movies in movie theaters.