Secret Cinema sold in deal set to hand windfall to British taxpayer

UK immersive cinema company Secret Cinema has been sold to US-based mobile ticketing platform TodayTix Group in a deal set to benefit the British taxpayer, which has a stake through a Covid venture capital fund.

Secret Cinema hosts film and TV screenings in atmospheric locations where audience members walk between different sets encountering actors playing characters from the movie or show. Its events typically cost around $10mn to put on.

TodayTix, which specialises in theatre tickets for Broadway and West End shows, is paying £88mn, according to people briefed on the deal.

Secret Cinema has announced partnerships with Netflix and Disney in recent years, recreating sci-fi drama series Stranger Things in a disused Los Angeles parking lot and more recently superhero saga Guardians of the Galaxy in London’s Wembley Park.

The UK government has a stake through a scheme set up to support innovative businesses during the Covid-19 pandemic. It invested £4mn in Secret Cinema in 2020 through its Future Fund, which was managed by the state-owned British Business Bank.

Secret Cinema is one of 400 businesses in the fund that have had its BBB loan converted into shares. Other investments include a jazz-streaming service, a cannabis products company and a sex party planner.

Many of the 1,190 early-stage businesses that received investment from the state-backed venture capital fund have struggled. The Financial Times reported last month that a BBB non-executive director admitted in a meeting last year that most companies in the Future Fund would become “zombie businesses”. More than 60 per cent of returns have come from just 6 per cent of investments, according to the BBB.

Secret Cinema’s new owner will help fuel its expansion in the US — with the search for a permanent location in Los Angeles under way and a nationwide tour planned for next year — alongside allowing the company to produce open-ended theatrical runs instead of short-term shows.

Secret Cinema’s founder Fabien Riggall sold his majority shareholding to UK-based private equity firm Active Partners in 2016, but retained a stake.

Investors — which include Active Partners, Riggall and the British taxpayer — will receive payment for their shares within the next three years based on future financial goals.

Brian Fenty, co-founder and chief executive of TodayTix Group, said he had a “high degree of confidence” that the British taxpayer would profit from their investment. Fenty said in the takeover negotiations that Secret Cinema’s management had “always put the Future Fund first . . . to make sure they are in the best position to recover [their investment] but they are also in the best position to profit”.

The company’s trading performance was hobbled by the pandemic with turnover falling to £6.2mn in 2020 from a high of £15.2mn in 2019. It briefly shifted to drive-in movie screenings to comply with Covid-19 restrictions.

“We’re very busy,” said Max Alexander, Secret Cinema’s chief executive. “We’ve come from the pandemic into a concatenated series of crises — cost of living, energy — but we’re heartened by where we are.” Some of Secret Cinema’s recent London shows have attracted audiences in excess of 100,000.

Fenty said Secret Cinema’s team were “magicians and wizards at what they do”. He added that audiences had “an insatiable thirst for these coveted, immersive experiences and Secret Cinema has been setting the bar . . . and I think we’re going to take that spirit and bring it to the commercial stage more broadly.”