KEY POINTS:
SkyCity Entertainment has failed to clinch a deal for its cinema business after more than a year spent trying to off-load the poor-performing assets.
The hotel and casino operator first signalled its intentions to sell the cinemas in May last year, shortly before the resignation of its then-chief
executive Evan Davies.
It received interest from at least three parties by November but the offers were thought to be well below its $100 million asking price.
At the time the company was also fielding interest from bidders wanting to buy the entire group but this failed to eventuate and in February SkyCity wrote down the value of the assets by $60 million in a bid to move them on.
Yesterday SkyCity said discussions with a potential buyer had progressed to the point of signing but could not be completed because the party was unable to achieve a "satisfactory financing arrangement". The buyer is thought to have been US firm Reading Cinemas.
SkyCity chief executive Nigel Morrison said it was disappointing in so far as the amount of time and effort the process had taken.
He said SkyCity would now focus on running the assets, which are New Zealand's biggest cinemas business, to the best of its abilities.
"It is business as usual. While our cinemas business is non-core, and represents approximately only 3 per cent of the value of the SkyCity group, we are confident that opportunities exist to enhance the performance from that currently being achieved."
The cinemas business includes 69 SkyCity cinemas, a 67 per cent stake in Village Cinemas Fiji and a 50 per cent stake in Rialto Cinemas.
It has recently opened new cinemas in Albany on Auckland's North Shore and will soon open revamped cinemas in Manukau City.
Morrison said it would also look to appoint a new cinemas boss after the departure of Matthew Leibmann in March.
The failed sale has come as little surprise to market commentators and is expected to have already been priced in to the company's share price.
Forsyth Barr analyst Jeremy Simpson said difficult financial markets in the wake of the US credit crunch and a small pool of potential buyers had combined to make the sale a tough ask.
"It's not surprising they haven't been able to do it."
But, he said, the failure to sell the cinemas business did not change its fundamental view that the business was in a good position to turn around its poor performance with a new CEO and management team in place and recently refurbished Auckland casino.
Other commentators said it was likely that SkyCity would look to sell the assets further down the track when market conditions improved.
The cinemas unit had a $7.1 million pre-tax profit on assets valued at $106.4 million in its annual report. The group's total assets were valued at $1.64 billion.
SkyCity's share price closed up 2c to close at $3.68 yesterday.
BIG SCREEN
SkyCity's cinemas business:
* 69 SkyCity cinemas
* 67 per cent stake in Village Cinemas Fiji
* 50 per cent stake in Rialto Cinemas
