Drama off-camera in battle for MGM cinemas

The pitched battle for the MGM cinema chain, which ended in a surprise victory for Richard Branson's Virgin group late last week, may have been one of the hardest-fought on record, advisers to the companies involved said.

All-night negotiating sessions, ever-changing bidding groups and high- risk jockeying for advantage complicated what might have been a straightforward sale, and helped push the price to pounds 195m from estimates of about pounds 150m when the auction was launched last year.

Egos were bruised on several teams - nowhere worse, perhaps, than on the 35-strong group advising Rank Organisation. Rank, advised by Merrill Lynch, submitted a bid on its own, despite informal indications from the Office of Fair Trading that it would face scrutiny because it owns Britain's second-largest cinema chain.

Carlton Communications, the holder of two ITV licences and owner of a film processing operation, was desperate for the chain, and was a front- runner right up to the end.

Virgin came to the last round as a junior partner, in league with the US investment vehicle Reading and associate company Craig Corp, both controlled by the US entrepreneur Jim Cotter.

The hard negotiating then began. The sellers, Credit Lyonnais, represented by the bank director Antonin Pujos, were advised by SG Warburg, which organised meetings to discuss the bids of the five finalists.

In early June, events began to move quickly. CS-First Boston, adviser to Reading/Craig and Virgin, called Rank with an offer to join forces, on the assumption that Carlton had the edge. The new partnership of Reading, Rank and Virgin then asked for, and received, a 30-day period during which the sellers would negotiate exclusively with them. Within a week, however, Rank bailed out, preferring to stick to its own bid and apparently convinced its competition would be unable to finance an offer at a winning level.

Reading itself started to have second thoughts, concerned about financing the deal without the extra cash Rank had said it would provide. In a decision that all parties insist was amicable, Reading decided to call it quits.

Christian Purslow of CS-First Boston and Virgin Communications' chief executive, Robert Devereux, vowed to continue even as the odds seemed to be mounting against them.

On 25 June TPG, the US leverage buyout group, contacted Mr Devereux, offering to take an equity stake in a Virgin-led consortium. With TPG on board, Virgin asked the seller for four working days to complete a new financing package.

Credit Lyonnais was looking for the highest cash bid and was resolute that the deal would close on 30 June. But it was prepared to wait, knowing it had unconditional bids from both Rank and Carlton on the table.

By 3am last Thursday, Mr Devereaux and Credit Lyonnais' Mr Pujos had reached an agreement. Both Rank and Carlton, unaware that TPG had joined the Virgin bid and that Bankers' Trust had agreed to provide debt financing, had assumed the deal would come unstitched at the last minute.

Rank even had a plan to sign and close the deal on the same day, arranging to fly to Paris before the ink was dry to ensure support from the bank and the French government. It believed it could then weather regulatory scrutiny in the UK, provided it sold off some cinemas in areas where it now competes head-to-head with MGM.

In the event, Virgin got the deal it wanted, and control of Britain's largest cinema chain, leaving Rank and Carlton licking their wounds.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering