Affected market: Cinema exhibition of films
Full text of the decision:
Undertakings in lieu of reference:
Undertakings accepted decision
The OFT's decision on reference under section 22 given on 28 April
2005. Full text of decision published 28 June 2005.
The Blackstone Group (Blackstone) is an international private equity
investment and advisory group. On 13 October 2004, it acquired the
Cine-UK (branded Cineworld) cinema chain, which operates 34 multiplex
cinemas in the UK.
UGC Cinemas Holdings Limited (UGC) is a UK and Irish cinema
exhibitor, with 41 multiplex cinemas across the UK. The UK turnover of
UGC for the financial year ended 2003 [ ] was £135.5 million.
On 1 December 2004, Blackstone (through wholly owned subsidiaries)
acquired sole control of UGC.
As a result of this transaction, Blackstone and UGC ceased to be
distinct. The UK turnover of UGC exceeds £70 million, so that the
turnover test in section 23(1)(b) of the Enterprise Act 2002 is
satisfied. The OFT therefore believes that it is, or may be the case,
that a relevant merger situation has been created.
By way of a decision of 28 April 2005 (the Decision) the OFT announced
that, on the evidence available to it, the OFT believed that it may be
the case that the merger may be expected to result in a substantial
lessening of competition in six areas, covering 7 UGC cinemas (see note
1). A copy of the Decision is attached at Annexe 1.
On this basis, the OFT decided that the merger would be referred to the
Competition Commision unless Blackstone gave suitable undertakings
pursuant to section 73 of the Enterprise Act to address the competition
concerns arising from the merger.
Blackstone indicated a willingness to give undertakings to make
divestments in each of the 6 localities where Cineworld and UGC cinemas
overlap and the OFT believes that it is or may be the case that a
substantial lessening of competition will, or may be expected to, arise
as a result of the merger.
On 17 May 2005, the OFT published the proposed undertakings inviting
interested third parties to give their views on them to the OFT. The OFT
did not receive any responses to suggest that the proposed undertakings
were not appropriate to remedy, mitigate or prevent the competition
The merger would have been referred to the Competition Commission if
Blackstone had failed to give suitable undertakings pursuant to section
73 of the Act to address the competition concern outlined above. The OFT
has decided to accept the proposed undertakings in lieu of reference as
they address that competition concern.
This merger will therefore not be referred to the Competition Commission
and the undertakings, which have been signed by Blackstone LR Associates
(Cayman) IV Ltd. (on behalf of Blackstone) and its subsidiary Cineworld
UK Limited, the text of which is attached as Annexe 2 to this decision,
came into effect on 21 June 2005.
- Boldon, Harlow, Swindon, Wigan, Birmingham Great Park, and