Gulf & Western Says It Will Pay $220 Million for Mann

Gulf & Western, determined to add significant movie-theater holdings to its entertainment division, said Friday that it will pay $220 million in cash to acquire Mann Theatres of California, the nation’s eighth-largest chain with 360 screens. The acquisition will give Gulf & Western ownership of two-thirds of the screens in Westwood Village, the most popular movie-house district in Los Angeles, as well as the venerable Chinese Theater in Hollywood.

Separately, it was learned that Tri-Star Pictures is expected to announce shortly a plan to acquire Loews Theatre Management Corp., the nation’s 13th-largest chain, which controls some of Manhattan’s most prestigious theaters.

Industry sources said the price could exceed $300 million--which, if correct, will net an extraordinary profit for Los Angeles businessman Jerry Perenchio and other investors. They paid $158 million for the chain 15 months ago and have since sold some Manhattan real estate beneath the theaters for more than $40 million.

The deals underscore the eagerness of motion picture producers and distributors to buy theaters and extend control over their costly films’ destinies. Gulf & Western, which owns Paramount Pictures, and Tri-Star are just two of five film distributors to acquire theater chains or announce deals since January.

Earlier this year, Paramount acquired 24 Trans-Lux theater screens in Connecticut and New York for $15 million. Then, in July, Tri-Star said it would acquire the United Artists Communications chain for $500 million if another firm, Tele-Communications of Denver, acquires 80% of UA’s parent company. To date, those transactions have not occurred.

Efforts to reach Tri-Star Chairman Victor Kaufman or the company’s general counsel for comment were unsuccessful.

As long ago as July, published reports said Ted Mann, sole owner of the Mann Theaters chain, was negotiating to sell it to Gulf & Western for less than $200 million, but Mann executives at that time flatly denied that the company was for sale.

Ted Mann, the chain’s chairman, did not return a reporter’s call Friday.

Gulf & Western announced, however, that Mann would continue to serve as chairman and chief executive and would also produce motion pictures for Paramount over a five-year period.

A Paramount spokeswoman declined to say how many films Mann might be entitled to produce, or how long he might serve as the chain’s top executive. In response to a question, however, she said no name change is anticipated for the company, and she ruled out the restoration of the “Grauman” name to the historic Chinese theater on Hollywood Boulevard, acquired by Mann in 1973.

With the latest deals, buyers appear to be paying a dramatic premium over the industry’s former standard of five times or six times cash flow, industry sources said. (Cash flow is defined as net profit before interest, taxes and depreciation are deducted, one executive explained.)

Gulf & Western appears to be paying 10 times the cash flow generated by Mann theaters, whereas Tri-Star may be paying as much as 11 or 12 times Loews’ cash flow, industry executives said.

One movie-theater executive privately derided the race by movie producers and distributors to enter his business. He said the stampede was touched off by MCA’s acquisition of 50% of Cineplex Odeon, an aggressive Toronto-based exhibitor, for $159 million last May.

Studio executives have “never been renowned for originality of thought,” the theater executive said. With a boom in theater construction adding 10-plexes and 12-plexes to the horizon, he foresees no problem for movie distributors in finding attractive theaters for their products.