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Harcourt to Spin Off General Cinema : Entertainment: The company is expected to use the theaters' cash flow for investments and acquisitions.


Harcourt General Inc. said Wednesday that it will spin off its General Cinema Theatre chain--the nation's third-largest in revenue and fourth-largest in screens--to its shareholders, in part to simplify the publishing, retail and insurance giant.

The tax-free distribution will result in a new entity called GC Companies Inc. headed by Chairman Richard A. Smith.

Smith is expected to use the theater chain's strong cash flow in making various investments and acquisitions. He and his family own about 28% of Harcourt General and will own about the same percentage of GC Companies stock after the spinoff, the company said.

Smith has guided Harcourt--which changed its name from General Cinema Corp. in March--through such major deals as the purchase of publisher Harcourt Brace Jovanovich for $1.5 billion and the acquisitions of Neiman Marcus, Bergdorf Goodman and Contempo Casuals from Los Angeles-based Carter Hawley Hale.

Although movie theaters were the foundation for the Boston-area company and helped fund acquisitions, Harcourt said the operation now contributes less than 5% of operating earnings and 12% of revenue.

General Cinema has 1,351 screens at 248 locations nationwide, including 100 screens at 22 locations in California. In the nine months ended July 31, the operating earnings of the theater business totaled $20.9 million on revenue of $380.1 million.

Harcourt will also transfer $64 million of cash to the new company. Harcourt shareholders will receive one share in the new company for every 10 shares of Harcourt common and Class B stock they own.

Harcourt stock rose 75 cents to $42.25 on the NYSE.

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