Cineworld calls off £290m flotation plan

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The Independent Online

Britain's second-largest cinema chain, Cineworld, became the latest casualty of choppy stock markets yesterday as it postponed its planned flotation expected to value it at £290m.

The total enterprise value, including debt, was thought to be £400m to £450m.

Cineworld joined a growing number of companies that have delayed their initial public offerings because of volatile stock markets. These include the spread-betting firm CMC Markets, the property group Sigma Capital and MezzVest, the mezzanine finance arm of the private equity house, CapVest.

Cineworld's chief executive, Steve Wiener, said: "We have been very encouraged by institutional investors' positive reaction to our company. However, Cineworld and its shareholders have decided to postpone the planned flotation as a result of adverse market conditions."

Global equity markets have taken a battering in recent weeks amid sliding commodity prices and concerns that rising inflation will lead to higher interest rates that could push the world economy into recession.

On 10 May, when Cineworld announced its intention to list, the FTSE 100 traded at about 6,100. Yesterday it closed down 2.51 per cent at 5,562.9. The slump has made investors wary and some of the stock market debuts that have gone ahead have been poorly received. The German low-cost carrier, Air Berlin, was forced to slash its IPO price range and cut the number of shares on offer and extend the offer period by almost a week.

Cineworld was bought by the US private equity firm, Blackstone, in October 2004 for a reported £120m, and then combined with the British arm of the French group, UGC, in a £330m deal. Mr Wiener and his fellow directors of Cineworld are in line for a substantial windfall when the company does float as they collectively own a 10 per cent stake.

Cineworld had planned to use some of the proceeds from the IPO to pay down debts of £240m. But it stressed that it was in a strong financial position, having notched up a 17 per cent increase in earnings before interest, tax, depreciation and amortisation of £44m last year on revenues of £272m.

After a World Cup-induced lull over the next four weeks, Cineworld expects a strong summer with blockbuster films such asOver the Hedge from the makers of Shrek, Pirates of the Caribbean: Dead Man's Chest and Superman Returns to be released.