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 7 January
2005. Full text of decision published 13 May 2005.
Terra Firma Investments (GP) 2 Ltd (Terra Firma) manages a number of
private equity funds. On 2 September 2004, Terra Firma acquired Odeon
Equity Co. Limited (Odeon), the largest cinema exhibitor in the UK, with
United Cinemas International (UK) Limited and Cinema International
Corporation (UK) Limited (collectively 'UCI') operate multiplex
cinemas in the UK. Prior to the merger, UCI was the fourth largest
cinema exhibitor in the UK, with 32 cinemas nation-wide. Its UK turnover
in the year to 31 December 2003 amounted to £123 million.
On 28 October 2004, Terra Firma acquired sole control of UCI through its
As a result of the transaction, Terra Firma and UCI ceased to be
distinct. The UK turnover of UCI exceeds £70 million, so that the
turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act)
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 7 January 2005 (the Decision) the OFT announced
that, on the evidence available to it, the OFT believed that it is or
may be the case that the merger may be expected to result in a
substantial lessening of competition in 11 areas, covering 13 UCI
cinemas (see note 1). A copy of the decision is attached at
On this basis, the OFT decided that the merger would be referred to the
Competition Commision unless Terra Firma gave suitable undertakings
pursuant to section 73 of the Enterprise Act to address the competition
concerns arising from the merger.
Terra Firma indicated a willingness to give undertakings to make
divestments in each of the 11 localities where Odeon and UCI 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 7 April 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 concerns identified.
The merger would have been
referred to the Competition Commission if Terra Firma 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
This merger will therefore not be referred to the Competition Commission
and the undertakings, which have been signed by Terra Firma and its
subsidiary, Corleone Capital Limited, the text of which is attached as
Annexe 2 to this decision, came into effect on 9 May 2005.
- Clydebank, Newcastle Gateshead/Silverlinks, Poole, Sutton, Tamworth,
High Wycombe, Dudley, Hatfield, Surrey Quays/Greenwich, Basildon, and