Cineplex Unveils Studio Tour Plans : Company Also Says It Will Build Theater Chain in U.K.
Cineplex Odeon Corp., the 50% partner in MCA’s ambitious plan to build a studio tour attraction in central Florida, on Thursday gave its shareholders a first glimpse at the $450-million project, which has been kept under tight wraps until now.
It was the first time that the estimated cost has been disclosed, executives from both companies acknowledged after the annual meeting held in a newly acquired Cineplex theater in downtown Toronto.
Cineplex Chairman and Chief Executive Garth H. Drabinsky also outlined plans to begin constructing movie theaters in Britain, with a goal of adding 100 screens at an estimated cost of 50 million pounds ($94 million).
“We intend to operate in the United Kingdom through a separate company,” Drabinsky said, explaining later that shares in the British venture would most likely be sold in a private placement. The company will also take on separate debt.
Drabinsky said he will announce plans shortly for theaters in London, including a complex in the “heart of London’s West End theater district.”
More than 300 people attended the meeting, eager to question the 39-year-old founder and chairman about Cineplex’s rapid expansion and depressed stock price. Cineplex stock closed unchanged Thursday on the New York Stock Exchange at $8.625 a share, its 52-week low, and traded as low as $8.375 during the session.
In just one decade, the company has become one of North America’s largest movie theater owners, boasting 1,661 screens as of April 30. The company spent $110 million last year on construction and refurbishing its theaters as part of a three-year spending program that will end in 1990.
Drabinsky was asked to explain the precipitous drop in the company’s stock price, which has lost more than half its value in the past 12 months and tumbled 20% since the bleak day of the Oct. 19 stock market crash.
“I think someone is telling us we don’t have too much confidence in our company; maybe Wall Street and Bay Street are saying: ‘Hold on, Garth, where are we going?’ ” one shareholder said.
“We have tremendous confidence in what we’re doing,” Drabinsky replied. “We are already projecting (that) cash flow by the end of 1990 will be at $180 million, which is more than double where it is today.”
However, the depressed stock price will likely drive the company to borrow more heavily from its banks, Drabinsky acknowledged. Although shareholders voted Thursday to allow Cineplex to issue preferred shares, Drabinsky said: “I am not going to dilute the shareholders at all at these levels. Our bankers are extraordinarily confident in what we are doing.”
After the meeting, Drabinsky told reporters that Cineplex is negotiating to borrow as much as $175 million more. Cineplex already has credit lines of about $550 million, of which nearly $100 million was available at the end of 1987. But much of that sum was used this year to complete the $51-million purchase of the Washington Circle Theatres, noted Myron I. Gottlieb, Cineplex’s vice chairman, in an interview after the meeting.
Cineplex shareholders voiced no criticism of the company’s plunge into the Florida theme park business with MCA.
Drabinsky presented slides of eight highlights of the park in what he termed a sneak preview. Five of the attractions are themed to highly successful movies, including “King Kong” and “Jaws,” which are staples of MCA’s tour in California.
In addition, the park will offer attractions themed to “Ghostbusters” “Back to the Future” and an “E.T.” building where “guests will ride special bicycles to E.T.'s planet and, of course, be greeted by E.T. himself,” Drabinsky said.
The Florida attraction will also offer street sets and facades of Hollywood, San Francisco and New York City, including a facade of New York’s landmark Plaza Hotel. The hotel’s inclusion appears ironic, since it was recently acquired by New York real estate developer Donald J. Trump, who threatened in February to acquire nearly 25% of MCA.
A shareholder asked Drabinsky if the company would repurchase the 48% stake that MCA owns if management changes hands. Drabinsky replied that “it would depend obviously on who takes over the company. If we found that there was compatibility with new management, we would obviously decide to maintain a relationship. If not, we have our rights as you’re quite aware.”