KEY POINTS:
SkyCity is expecting to end the year without making a decision on the sale of its cinema division.
Prospective buyers are apparently offering less than the $100 million-plus that SkyCity is understood to have paid for the chain.
Three cinema exhibition companies pitched offers to the SkyCity board
of directors in mid-November, but it is understood that one has withdrawn because its bid was so far below SkyCity's expectations.
In May, investors were relieved when SkyCity said it was looking at divesting companies not making an adequate return "with a particular focus on the cinema business".
But sources say the SkyCity negotiations have been difficult and the company is intent on recovering the high price it paid for the cinemas when it bought the 50 per cent stake held by Force, and later the remaining 50 per cent owned by Village.
Seven months after starting the sale process, SkyCity chairman Rod McGeoch said this week he did not expect to announce an outcome for SkyCity Cinemas before Christmas.
He has said the company would not sell the cinemas at just any price.
But this week's appointment of Nigel Morrison - who has a background in casinos and takes up the CEO post on March 17 - is expected to seal the fate of the cinema chain.
SkyCity Cinemas has 94 screens. It holds 50 per cent of Rialto Cinemas, which has 22 screens. It also has a 67 per cent stake in Village Cinemas Fiji, with 10 screens.
The cinema chain has 61 screens in Auckland with more planned, including a 10-screen complex at Westfield Albany to open in April.
Hoyts Cinemas and Reading Cinemas each have 48 screens and are under-represented in Auckland. But both could plausibly create market dominance issues in Auckland if they bought SkyCity Cinemas.
Australian cinema exhibition company Greater Union is understood to be a bidder but is not active in the New Zealand cinema sector, so it would not create competition issues.
SkyCity would not say how much it had paid for the cinema business, but company insiders suggested it was more than $100 million, counting expansion such as the new cinema complex at Chartwell, Hamilton.
ABN Amro's Carolyne Holmes previously suggested SkyCity might raise $116 million from the cinemas sale.
Still waiting on takeover offer
SkyCity has confirmed market speculation that a potential buyer of the casino operator has still not been able to conclude an offer.
The update on progress on a possible deal was included in a letter to SkyCity shareholders yesterday.
This month, SkyCity said one party was interested in making a bid, but was not ready at that time.
The interested party told SkyCity that it had effectively completed due diligence and was "highly interested in pursuing a transaction", but was not then in a position to put in an offer.
SkyCity chairman Rod McGeoch said yesterday "the party which had been considering an acquisition of SkyCity has been unable to conclude an offer as at this time".
SkyCity shares closed yesterday down 3c at $4.52, having ranged between $5.56 and $4.05 in the past year.
- NZPA
