Shares in the embattled cinema operator Cineworld jumped on reports of a takeover offer from rival company Vue International.
The debt-laden chain, which was forced to file for bankruptcy protection in the US last autumn, was up nearly 20% on Monday on reports that Vue International, Europe’s largest privately owned cinema operator, has obtained financial backing from its new shareholders as it eyes up a takeover bid for Cineworld.
Funds managed by Barings and Farallon Capital Management would provide funding to Vue International for a potential acquisition, as first reported by Sky News.
Cineworld filed for US bankruptcy protection, known as Chapter 11, last September when it struggled to get back on track after most of its 751 global sites were temporarily forced to close during successive Covid lockdowns.
As a result, Cineworld has been marketing its assets for sale in an attempt to recapitalise the business.
Under Chapter 11, a struggling company is temporarily sheltered from creditors, giving it time to restructure its finances and try to reach a deal over how to reduce its debt.
Despite Monday’s rise, Cineworld’s shares are still trading at just above 5p, which is more than 87% lower than their 40p level a year ago.
Vue International – which has 227 sites across nine countries, 91 of which are in the UK and Ireland – is understood to be among the parties interested in Cineworld, who would have to make a bid for the company before a deadline on 16 February.
A spokesperson for Vue said: “Our focus at Vue remains on managing the strong recovery we are seeing in our business. While it would therefore be premature to speculate about any acquisitions at this stage, we continually evaluate a range of possible opportunities.”
London-listed Cineworld said in January it would “run a marketing process in pursuit of a value maximising transaction for the group’s assets”.
The company said it was focusing on looking for a buyer for the whole group, rather than breaking up the business.
In January, Cineworld denied it had attempted to sell some of its cinemas in the US and Europe to AMC Entertainment, the owner of the rival Odeon chain.
Cineworld has 128 cinemas in the UK, under the Cineworld and Picturehouse brands, all of which are operating as normal.
The company accumulated £4bn in debt during the pandemic. It reported a $708m (£592m) loss for 2021, as a result of its failure to bounce back from Covid closures, and the financial fallout of its abandoned takeover of Canadian rival chain Cineplex.
Despite recent box office successes including Avatar 2, cinemas complain that studios have been slow to return to pre-pandemic levels of film releases, vital for bringing in audiences.
Cineworld declined to comment.
