MUMBAI: Reading International has announced that it completed the acquisition of 15 leasehold cinema complexes and related assets through its newly formed subsidiary Consolidated Amusement Theatres.
The purchase price of the cinemas and other assets was $69.3 million, and was financed primarily by a $50 million term loan and a $5 million revolving line of credit provided by institutional lenders. While the term financing is initially guaranteed by RDI, the guarantee will expire once the debt-to-cash flow ratio falls below a certain threshold.
Based on management’s estimates this should occur in about 18 to 24 months, upon the debt being reduced to approximately $38 million, by applying most of the theaters’ net cash flow during that same timeframe to paying down the financing. An additional $21 million of financing was provided under a term loan from an affiliate of the sellers.
The cinemas comprise 181 screens and generate revenues of approximately $80 million annually. Nine of the complexes (98 screens) are located in Hawaii and represented nearly 70% of the Hawaiian box office receipts reported in 2007. The other six complexes (83 screens) are located in California, and consist of a 16-screen complex in Bakersfield, a 16-screen complex in Sonoma County, and four locations in San Diego.
The San Diego cinemas represent the third largest market share in the area at approximately 12%. RDI also acquired in the transaction the Consolidated Amusement trade name, recognized in the Hawaiian Islands for some 75 years. The acquisition was structured as a purchase of 14 locations and a management agreement for one location.
Recourse under the seller financing is limited to Consolidated and its assets. In addition to the acquired assets, RDI has contributed to Consolidated two of RDI’s domestic theaters located in New Jersey and Dallas. An affiliate of the sellers also has agreed to provide up to $3 million of additional term loans to RDI at its request.