Auction of MGM cinemas delayed

BY MATHEW HORSMAN

A final decision on the pounds 200m auction of the MGM cinemas, expected yesterday afternoon, has been postponed while Rank Odeon, the lead bidder, seeks to restructure its offer to avoid a reference to monopoly regulators.

Other bidders expressed annoyance that the auction process had dragged on for far longer than initially promised. They have been told an announcement may come this morning, according to sources close to the sales talks.

Rank Odeon, which controls 25 per cent of the UK cinema exhibition market, is understood to have discussed its bid informally with the Office of Fair Trading, and is prepared to sell off cinemas in areas where it may be in a dominant position.

If its bid is accepted by Credit Lyonnais, the distressed Swiss bank that put the MGM cinemas up for sale, it would agree undertakings with the OFT to dispose of some assets in advance of a final decision by the Department of Trade and Industry to clear the bid.

It is believed a detailed divestiture plan has been drawn up to reduce dominance on a regional and local basis.

A spokesman for the OFT said: "We never comment on whether we are in discussions with companies. Hypothetically, if we see a way that certain undertakings can be given by companies negotiating a merger, for instance by selling certain holdings, then we would pass our advice to the DTI."

Without the undertakings, the purchase of MGM's 120 cinemas would be sure to spark a Monopolies and Mergers Commission reference, analysts said.

Credit Lyonnais, which inherited the cinemas when it took over MGM, the Hollywood studio, has been holding out for the highest unconditional offer. If Rank Odeon is unwilling to make its bid unconditional, or is unable to provide adequate assurances that the purchase would pass regulatory muster, Lyonnais might consider accepting a lower, unconditional bid from competing companies.

Four other bidders have put in offers, including Time Warner, one of the UK's largest owners of multiplex cinemas, and Virgin, Richard Branson's group. Two groups led by current and previous management of Rank Odeon are also on the shortlist. Virgin is believed to have made an unconditional cash bid, although it intends to sell on MGM's small Danish and Dutch chains.