KEY POINTS:
Overseas bidders for SkyCity's cinema chain will pitch their offers to the board of directors this week as the troubled gaming company works towards a sale of the entire group.
Contenders for SkyCity Cinemas - which could be worth as much as $116 million - are understood to include Australian firm Greater Union, which is cashed up after recently selling its stake in its Australian rival Village Roadshow.
The other contenders are believed to be US-based Reading Cinemas and Hoyts, formerly a joint venture between James Packer's PBL and West Australian Newspapers, which has been acquired by Australia's Pacific Equity Partners.
Both Reading and Hoyts are active in the New Zealand cinema business - Hoyts' Sylvia Park multiplex has challenged SkyCity Cinema's dominance in Auckland - so could face issues over competition should they proceed to a formal bid. Interest from New Zealand buyers appears to have faded, largely, it is understood, because of sale price targets.
In the wider sale process of the entire SkyCity Group, indications are private equity firms TPG, Providence Equity Partners and CVC Asia Pacific are kicking tyres on the casino company.
Chairman Rod McGeoch has indicated there will be no developments before Christmas.
Investors have attacked SkyCity's handling of the sale process where it has opened the door to potential buyers of the wider company, advanced a sale process for its cinema division and sought a permanent leader to replace acting chief executive Elmar Toime.
And the cinema sale foreshadowed back in May has proceeded slowly.
SkyCity has consistently said the cinema chain has not delivered a sufficient return on capital, but chairman Rod McGeoch told angry shareholders at the October 26 annual meetings SkyCity was not selling assets at any price.
Cinema industry veteran Barrie Everard indicated in the past he was interested in buying SkyCity assets which include a 50 per cent stake in the arthouse Rialto Cinemas with Reading.
Everard insisted this week he did not know the state of deliberations or how SkyCity viewed his interest.
But other industry sources said interest from local individuals had cooled because SkyCity was seeking a premium price to cover the price it paid to pick up the 50 per cent of the company from its former joint venture partner Village Roadshow.
The cinema operation is expanding and is understood to have around $10 million in commitments as a result of a new multiplex at Albany, north of Auckland, and shifting its Manukau multiplex from a stand-alone building inside the Westfield shopping mall.
Like the casino, the cinema business offers owners a good cash flow.
But cinema revenue fluctuates based on the appeal of Hollywood movies and the local box office has slowed after a flurry of blockbusters mid-year.
A strike by Hollywood scriptwriters will have no immediate impact on cinema revenue. But if it is prolonged, and affects Hollywood production, it could cause falls in box office takings next year.
SkyCity said yesterday it did not expect to progress with the cinema sale before the end of November.
