Threat to MGM sale

Legal action may cause the curtain to fall on bid for cinema chain
Click to follow
The Independent Online
THE planned sale of the MGM cinema chain to a consortium which includes Richard Branson's Virgin Group could be delayed or even scuppered by legal moves from Giancarlo Parretti, the chain's controversial former owner.

Mr Parretti is seeking an injunction stopping the sale until after the hearing of a suit against the current owner, Credit Lyonnais, alleging racketeering and 17 other charges. The hearing is due to take place in the autumn.

Judge Hubbell of the Californian Supreme Court has agreed to hear Mr Parretti's application on 24 July in Los Angeles. Two weeks ago, Credit Lyonnais failed in an attempt to have the application dismissed .

Jonathan Greenwood, Mr Parretti's solicitor in the UK, said the legal moves should postpone the sale. Mr Parretti's action is part of a $4bn (pounds 2.5bn) claim against Credit Lyonnais. SG Warburg, the merchant bank handling the sale, says the action is unlikely to have any impact on the auction.

A consortium led by Reading Corporation in Philadelphia is currently in exclusive negotiations to buy MGM, Britain's biggest cinema chain with around 115 theatres. Virgin is also part of the consortium and other interested parties may join it. Reading's largest shareholder is Craig Corporation, a Californian cinema operator that claims to have invented the drive- in movie house.

The sale has been plagued with delays, despite the keen interest shown.

A source involved at an early stage in the negotiations to sell the chain said: "It's the audiences which are worrying people. You have these great figures showing rising audiences, and all of a sudden they come to a stop at the start of this year."

He added: "MGM is also complicated by its old-fashioned town-centre single- screen cinemas. Bidders want MGM for its multiplexes. Most will want to sell the older properties. But these are less likely to attract buyers."