The British cinema sector is set for a major shake-up as private equity firm Terra Firma is to acquire UCI and Odeon, the UK’s largest cinema chains.

Terra Firma announced that it had agreed deals with both Viacom – owner of UCI – and Odeon shareholders, which will be financed with a mixture of debt and equity. Although undisclosed, the combined value of the two transactions is believed to be worth around £580m.

Guy Hands, Terra Firma’s chief executive, said: “UCI is a leading international company in each of the seven countries it operates in, while Odeon has a leading position in the attractive UK market.

“We strive to identify acquisition targets backed by hard assets with stable cash flows and we also believe that there are exciting opportunities to develop Odeon further.”

The deal could fall foul of the Competition Commission, however, as it would result in Terra Firma controlling around 35 per cent of the UK’s box office share – above the recommended limit set for the sector by the Monopolies and Mergers Commission (MMC).

Some analysts, though, have pointed out that despite the large market share, most of the cinemas are seen as local monopolies, reducing the need for downsizing the proposed joint estate.

UCI operates 86 multiplex cinemas with 834 screens in the UK, Ireland, Spain, Portugal, Italy, Germany and Austria. UCI’s operations outside Europe are not included in the acquisition.

Odeon has 97 cinemas with a total of 619 screens across the UK. The company reported pre-tax profits of £38.5m in 2003.