UPDATE 2-Doughty Hanson to buy Vue, No. 3 UK cinema chain

* Deal values Vue at 450 mln pounds – source

* CEO Tim Richards eyes push into continental Europe

* Richards: digital heralds cinema’s “second golden age”

* Doughty beat BC Partners, OMERS to strike deal -source
(Updates with CEO interview)

By Quentin Webb

LONDON, Nov 8 (BestGrowthStock) – Private equity firm Doughty
Hanson [DOUHA.UL] agreed to buy Vue Entertainment [VUENT.UL],
Britain’s third-biggest cinema chain, in a deal that a source
said valued the business at about 450 million pounds ($728
million).

Doughty Hanson is betting digital movies, including a new
generation of 3D films from such directors as Steven Spielberg
and James Cameron, will help Vue keep growing, despite
Britain’s competitive cinema market.

In a statement on Monday, Doughty Hanson said it agreed to
buy Vue from Cavendish Square Partners, a joint venture of
private equity group Coller Capital, Lloyds Banking Group Plc
(LLOY.L: ), U.S. hedge fund Och-Ziff (OZM.N: ) and management.

The statement gave no financial details, but a source
familiar with the situation said the deal valued Vue at 450
million pounds including debt.

Vue Chief Executive Tim Richards said the new investor will
help power Vue’s push into continental Europe — a move that
will make it a bigger rival to European leader Odeon & UCI
Cinemas Group, and potentially pit it against companies such as
Belgium’s Kinepolis (KIPO.BR: ) or Germany’s CinemaxX (MXCG.DE: ).

“Our goal is to be a major European player,” Richards told
Reuters in a telephone interview. He said the firm would
continue its so-called “buy-and-build” strategy, mixing
takeovers with organic growth.

Richards said all of his 12-strong management team, who had
together owned just 50 percent of the business, were
reinvesting, ploughing more than half their proceeds back in.

‘TURNED UPSIDE DOWN’

Richards said digital projection allows cinemas to show a
wider range of films with lower distribution costs, as well as
live sports, music and theatre, so they can make better use of
seats that sit empty four-fifths of the time.

“The entire cinema-exhibition industry is about to be
turned upside down on the back of digital,” he said. “We are
genuinely about to enter into the second golden age of
cinema.”

Unlike earlier three-dimensional films, digital 3D does not
rely on projectionists’ skills to align two images, he added.

“It’s not a flash in the pan. It’s here to stay this time,”
Richards said, predicting “every major summer blockbuster” will
now be in 3D, and pointing to a slate that includes Spielberg
and Peter Jackson’s “Tintin” film and Cameron’s two “Avatar”
sequels.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graphic on Britain's cinema industry, click: http://r.reuters.com/fek74p For an earlier Dealtalk on Vue, click: [ID:nLDE68J1U7] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Vue competes with top UK cinema operator Odeon, owned by
Guy Hands’s Terra Firma [TERA.UL], and No. 2 operator Cineworld
Group (CINE.L: ), which is backed by Blackstone Group (BX.N: ).

Media reports have said Richards was hoping new investors
would back to him to lead a major consolidation of Britain’s
cinema business, potentially bidding for either rival.

He refused to comment in detail on possible deals but said:
“I wouldn’t rule out anything. Like a lot of companies that are
growing, we look at every opportunity strategically, but we’re
not focused on any one specific company or even any one
specific market right now.”

Doughty beat rival offers from BC Partners [BCPRT.UL] and
the private equity arm of Canadian pension fund Ontario
Municipal Employees Retirement System (Omers), a second person
familiar with the situation said.

Vue earned 51.5 million pounds in 2009 before interest,
taxes, depreciation and amortisation (EBITDA).

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 of about 7.5 times EBITDA.
($1=.6179 Pound)
(Reporting by Quentin Webb and Karolina Tagaris; Editing by
David Hulmes and Steve Orlofsky)

UPDATE 2-Doughty Hanson to buy Vue, No. 3 UK cinema chain