Rank leads in battle for MGM cinemas chain

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The Independent Online
The Rank Organisation is thought to have topped the bids for the MGM cinema chain, offering at least pounds 200m, according to sources close to the deal. However, details in the bids vary significantly, and direct comparisons are difficult.

There were also doubts last night whether the Rank bid was unconditional. The huge cinema chain operator would dominate the UK market if it won the MGM auction, and would likely face a reference to the Monopolies and Mergers Commission.

Credit Lyonnais, the ailing French bank that put the chain up for sale, was believed to be holding out for the highest unconditional bid, and had informal contacts with Rank to underline its position.

Warburg, which is advising sellers Credit Lyonnais on the deal, refused to provide details in advance of an announcement next week. But a Warburg insider said speculation that Rank and Credit Lyonnais had entered into exclusive talks aimed at cementing a deal was unfounded. The source insisted the auction process was still in motion.

The Opposition has already raised the sale in Parliament, seeking assurances that Rank would not be allowed to dominate the UK market. Trade Minister John Evans said that all "relevant factors, including the impact on competition in the cinema industry and the views of third parties" would be taken into account before the Office of Fair Trading decided whether to refer the sale.

It is believed that four other bidders have submitted final offers. The second-highest bid is thought to have been made by a consortium led by Richard Branson's Virgin Group, which includes US cinema chain Craig and merchant bank Credit Suisse-First Boston. Sources close to the Virgin partners suggested the bid was just under pounds 200m. It is understood that the consortium would sell on MGM's Danish and Dutch cinemas.

Time-Warner, one of the UK's largest multi-screen owners, and a management group are also thought to be among the finalists.

Rank has prepared a detailed plan to pre-empt MMC concerns, but analysts doubt a referral can be avoided. By buying MGM's 120 cinemas, Rank would control more than 50 per cent of the UK market.

The cinema business was the target of an OFT ruling last autumn, which demanded changes in the way films are distributed.

Independent cinemas have struggled to stay open in the face of competition from the large chains.

Sir David Puttnam, the film maker, has led calls for the protection of small cinemas.

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