Warner Buying 50% Stake in Gulf & Western Theaters

Gulf & Western announced Thursday that it has agreed to sell a 50% interest in its movie theater holdings in the United States to Warner Communications.

Both companies declined to disclose the terms of the transaction, but industry sources said Warner will pay just under $150 million, or half the sum Gulf & Western spent last year to acquire three theater circuits with 472 screens, including 360 operated by Mann Theatres of California.

Separately, industry sources said Tri-Star Pictures has been negotiating to acquire Commonwealth Theatres of Denver, the nation’s seventh-largest chain, from Cannon Group.

Cannon put the 425-screen chain up for sale last October, just four months after purchasing it for about $25 million in cash, plus the assumption of liabilities totaling $25 million to $30 million. In the interim, Cannon’s box office revenues failed to support its acquisition spree, and the company began retrenching.

Gulf & Western, Cannon and Tri-Star are three of five motion picture distributors that plunged into the movie theater business last year, as a wave of consolidation hit the industry.

For nearly 40 years, major movie distributors had steered clear of theater chain ownership because of the Justice Department’s successful effort to break up Hollywood monopolies through a series of antitrust actions.

In prepared statements, Warner and Gulf & Western both said the transaction hinges on government approval and the execution of a definitive agreement.