By Mark Kleinman, City Editor
Providence Equity Partners, a US investment firm, is to become the most influential player on the London stage by securing a takeover of the West End's biggest theatre group.
Sky News has learnt that Providence is expected to tie up a deal to buy a controlling stake in Ambassador Theatre Group (ATG) as early as Monday.
Providence is understood to have outbid a host of rivals including Blackstone, Carlyle, Charterhouse and Lion Capital in recent days to complete a takeover of venues such as the Lyceum and Piccadilly theatres.
Ambassador's current majority shareholder, Exponent Private Equity, is expected to remain a minority investor once the deal completes.
A number of international theatre groups are also understood to have been interested in examining Ambassador's books.
The timing of the takeover is surprising because of the expectation that a buyer would want to assess the company's performance during the crucial Christmas trading period, which accounts for about half of its annual trading profits.
Exponent acquired a roughly 55% stake in the UK's largest theatre operator in 2009 in a deal valuing it at just over £130m. The remainder is owned by a number of wealthy individuals and Ambassador's founders, Howard Panter and his wife, Rosemary Squire.
Ambassador's minority investors are said not to be keen to sell their shares as part of the current sale process, but one insider said the existing shareholder agreement contained a clause known as drag rights, which may mean that any buyer of Exponent's stake has the power to compel other investors to sell at the same time.
Exponent is expected to make a handsome return on its investment, which will also reap a windfall for Greg Dyke, the former BBC director-general who now chairs Ambassador as well as the Football Association. Other minority investors are said to include Rupert Gavin, the boss of Odeon and UCI Cinemas.
ATG owns about a dozen venues in London's theatreland, which are staging productions such as Jersey Boys, which is transferring to Ambassador's Piccadilly Theatre in March next year.
The Lion King, which is staged at the Lyceum, is one of the West End's most successful and long-running musicals.
In total, Ambassador owns 39 venues in Britain. It was established by Mr Panter and Ms Squire in 1992, and sold to Exponent four years ago in a deal that combined the existing ATG and the theatre portfolio of Live Nation, the American entertainment giant.
Since then, the company has expanded through bolt-on acquisitions including its debut appearance on New York's Broadway this year, when it paid around £40m to buy the Foxwoods Theatre, home to Spider-Man: The Musical.
A sale process will take place at a buoyant time for London's theatre industry. Ambassador saw a 17% surge in sales to £111m in the 12 months to March 2012, while operating profits during the same period rose nearly 70% to £15.5m. Both measures are understood to have grown again during the subsequent 12 months.
Overall West End ticket sales were up in 2012 for the ninth consecutive year despite an anticipated decline during the London Olympics.
Fears about the economic environment and the Games proved relatively unfounded with attendance increasing to almost 14m, up 0.56%, and box office sales setting a new record of £530m, up 0.27%.
Providence could not be reached for comment, while UBS, which is handling the auction, and Ingenious Corporate Finance, which is advising Providence, declined to comment.
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