U.K. Exhibitor Cineworld's Picturehouse Deal Raises Competition Concerns

The industry giant might have to sell some sites to address worries cited by British regulators.

LONDON – Cineworld, the U.K.'s second-largest exhibition chain, received on Aug. 20 an initial red flag warning from the Competition Commission for its $76 million proposed acquisition of City Screen Group, the parent company of rival art house movie theater operator Picturehouse Cinemas.

The British competition authorities told Cineworld that its proposed buyout is expected to result in a substantial lessening of competition in three local areas where there is a Cineworld movie house and a Picturehouse theater.

PHOTOS: Studios' New Box Office Pain: Homegrown Films Are Beating Tentpoles Overseas

The three problem areas are in a trio of towns across the U.K.

The Commission has given Cineworld a window to respond to its concerns before it issues its final decision on whether the deal can get the green light.

Cineworld said it has noted the Commission's proposals to remedy any harm to competition in these areas, such as divestment of an appropriate Picturehouse or Cineworld cinema, to get the OK.

Before the deal was struck, Cineworld operated 80 sites, of which 77 are multiplex sites with five screens or more.

The deal adds 21 sites and 60 screens to Cineworld's real estate and also Picturehouse Entertainment, the distribution arm operated by the group.

The Commission is set to issue its final decision in October.

Cineworld Group chief executive officer Stephen Wiener said: "We are disappointed that in these three locations we have been unable to convince the Competition Commission that Cineworld and Picturehouse are two fundamentally different businesses that could operate in the same area. Nevertheless, the combination of the two businesses will remain strategically compelling, as our recent results showed clearly, and we are committed to continuing the expansion and investment into both."