Regal CEO, CFO Talk M&A, Box Office, Windowing Trends

Courtesy of AEG

The exhibition giant says 2,500-3,000 screens would be attractive to it and could come up for sale in the coming years.

Regal Entertainment Group CEO Amy Miles and CFO David Ownby on Monday signaled an appetite for further acquisitions after the exhibitor recently said it has decided that a sale of the company would not be in the best interest of shareholders.

Regal, which has 534 theaters with 7,367 screens, put itself on the auction block in October, but ultimately decided against seeking a buyer earlier this year. Miles recently said that the management team has returned to "business as usual."

Speaking Monday at the Deutsche Bank Media, Internet & Telecom Conference in Palm Beach, Fla., Miles said Regal would continue to look for acquisition opportunities, highlighting that the company has used M&A as its preferred method of expansion over the course of its history.

Ownby said Regal has, since its IPO in 2002, on average acquired 200 screens per year. "There was a lot of activity in our space and M&A activity in our space in 2012 and 2013," he said. "About 2,000 screens changed hands," with Regal buying about 800. Things have quieted down since then. "One theory there is that smaller exhibitors look at this film slate and say, 'Now I've got a chance to put a lot of money in the bank for one year' " and may consider a sale later.

Ownby thinks there are 2,500-3,000 screens that would be be attractive for the company, predicting that deal flow would continue in the next two to three years. Overall, 38,000-39,000 screens exist in the U.S. The screens Regal is interested in acquiring — outside single theaters here and there — come from exhibition circuits Nos. 5 to 25 in size, with each having from 100 to 1,000 screens, Ownby said. 

Asked about possible deals abroad, Miles said Regal has "had a hard time" finding deals that are as financially prudent abroad as deals in the U.S.

Miles also said that there was "lots of excitement" around box office in 2015 and 2016, adding: "We share that excitement." She also highlighted the "stable nature" of the exhibition business longer-term.

Asked about the weaker 2014 box office, Miles said there were 20-25 films that fell out of the 2014 release schedule and there was also a "cyclical dip" due to product. She said this year has seen a strong rebound, with 2015 offering well-spaced tentpole releases, what looks like a strong summer, and a diverse slate. Regal's best years are ones that feature films for everyone, she explained. Looking beyond 2015, there are already some key tentpoles set for 2016, and the slate to date looks strong, she said.

Asked about the relationship with studios, she said, "It's amazing how wonderful the relationship is" in a strong-looking year like 2015. Miles lauded various studios for emphasizing the importance of the theatrical release window, saying that most windowing changes have come in the home video window. "That's good for our studio partners" and exhibitors as well, she said.

Asked about day-and-date releases that become available online, she said those are typically for smaller films that don't affect exhibitors' business, emphasizing past comments that Regal will always dedicate its screens to movies supporting the theatrical window.

Converting theaters to luxury seating has been a big focus for the company. Regal recently said it plans to convert about 25 percent of its current locations to luxury seats, and Miles said that would remain a core focus for her team.

Expanding concession offers is another one, she said, highlighting that concessions are a very profitable part of the business. The company currently has expanded menus at 120 locations. The company said it has seen the expanded menus attracting consumers that wouldn't otherwise have spent money on concessions. Regal is also adding alcoholic beverages as another opportunity to continue growing concession revenue.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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