Doughty Hanson buys Vue

LONDON (BestGrowthStock) – Private equity firm Doughty Hanson (DOUHA.UL: ) agreed to buy Vue Entertainment (VUENT.UL: ), Britain’s third-biggest cinema chain, in a deal which a source said valued the business at about 450 million pounds ($728 million).

Doughty Hanson agreed to buy the business from Cavendish Square Partners, a joint venture between private equity group Coller Capital and Lloyds Banking Group Plc (LLOY.L: ), U.S. hedge fund Och-Ziff (OZM.N: ) and existing management.

In a joint statement on Monday, Doughty and Vue said management, including founder and Chief Executive Tim Richards, who had owned 51 percent, will reinvest in the company. The statement gave no financial details.

The deal valued the business at 450 million pounds including debt, a source familiar with the situation said.

Cinema’s powers of cash-generation and resistance to recession, coupled with opportunities offered by 3D films and the transfer to digital projection, drew a range of bidders.

Earlier reports by Sky News, The Daily Telegraph and Financial Times said Doughty beat rival offers from BC Partners (BCPRT.UL: ) and the private equity arm of Ontario Municipal Employees Retirement System (Omers), the Canadian pension fund.

The deal could lead to a major shake-up of Britain’s cinema business. The industry is dominated by private equity, with top player Odeon owned by Guy Hands’s Terra Firma (TERA.UL: ), and No. 2 operator Cineworld Group (CINE.L: ) backed by Blackstone Group (BX.N: ).

Richards is hoping the new investors will back him to take over one of the bigger players, the earlier reports said.

Vue made earnings before interest, tax, depreciation and amortization (EBITDA) of 51.5 million pounds in 2009.

The Telegraph said this year’s EBITDA before rents was projected to be about 60 million pounds, meaning the deal gives Vue an enterprise value (EV) of about 7.5 times EBITDA.

($1=.6179 Pound)

(Reporting by Quentin Webb and Karolina Tagaris; Editing by David Hulmes)

Doughty Hanson buys Vue