Columbia Pictures Agrees to Acquire U.S.A. Cinemas for $165 Million

Consolidation of movie-theater ownership appeared to escalate Friday with Columbia Pictures Entertainment’s announcement that it has agreed to acquire U.S.A. Cinemas, a New England chain, for $165 million.

The acquisition will double the number of Columbia’s theater screens and grant it a near-monopoly of first-run theaters in Boston. Columbia already owns a powerful group of theaters in the New York area through its subsidiary, Loews Theater Management Corp.

Columbia executives declined to comment, however, on published reports that it is negotiating to form a partnership in Philadelphia with another major theater owner, AMC Entertainment.

Lewis J. Korman, Columbia’s senior executive vice president who oversees the theater subsidiary, wouldn’t discuss industry reports that Columbia Pictures--through Loews--has proposed booking and buying films for AMC’s theaters in the Philadelphia market, leaving only the actual theater operation to AMC.

50% of Gross Normal

According to industry sources, the proposal might appeal to AMC management because Loews pays less for films than does AMC.

Loews’ buying power stems from its ownership of key theaters in the New York area, deemed the nation’s most important market because of the concentration of film critics and national media.

Korman declined to discuss Loews’ buying practices, but the company is said to keep as much as 60% of the box-office gross from its New York theaters, while, elsewhere in the nation, movie-theater owners typically keep about 50% of the gross.

Film distributors have said privately that they may put up stiffer resistance to Loews in the Philadelphia market, which is less important than New York and also more competitive.

The acquisition of U.S.A. Cinemas “is evidence of consolidation in the exhibition business,” said Harold Vogel, a vice president at Merrill Lynch Capital Markets.

The timing of the deals may be due in part to the Reagan Administration’s tolerance of mergers, he said.

“This Administration . . . has been clearly deregulatory and laissez faire in its approach and it is likely that the next administration--whether it is Democratic or Republican--will not have such a free-form approach, so the impetus is for doing deals in this area sooner rather than later.”

At least four of the seven major film distribution companies have recently entered or invested in theater chains after years of concern that such purchases would be blocked by the Justice Department.

Distributors say they are not only eager to reap more of the box-office receipts of their costly films, but also they hope to nurture marginal movies until they attract an audience.

In the Columbia deal announced Friday, the 325-screen U.S.A. Cinema chain is being acquired from Boston Ventures Limited Partnership, a venture capital fund headed by William F. Thompson, former head of entertainment lending for Bank of Boston.

In Boston, U.S.A. Cinemas operates 12 theaters with a total of 41 screens.

In Connecticut, the company has 16 theaters with 38 screens. Other large concentrations are found in Syracuse, N.Y. (25 screens), and Cincinnati (28 screens).

Operating at Break-Even

According to industry sources, U.S.A. Cinemas is expected to generate about $17 million in cash flow this year, spending about $7 million on overhead.

Lisbeth R. Barron, an analyst with the New York investment firm of Balis Zorn Gerard, estimated that the company “is operating at a break-even or slight loss. Depreciation and interest equal or slightly exceed cash flow.”

But Barron explained that the acquisition is attractive because “generally people are not in the exhibition business for earnings. They’re in it for cash flow, to use to reinvest, to build or buy more theaters.”

Industry sources said Columbia Pictures expects to pare most of U.S.A. Cinemas’ overhead, eliminating the jobs of 40 to 50 employees and shifting the operation to Loews’ new headquarters in Secaucus, N.J.

Columbia executives are trying to recruit U.S.A. Cinemas President A. Alan Friedberg to serve as Loews’ chief operating officer, second in command to Bernard Myerson, Loews’ long-time president, according to sources.