November 14, 2014 / 6:10 PM / 5 years ago

UPDATE 1-U.S. movie ad firm merger on hold pending trial -lawyer

(Adds details from court hearing, background)

By Nate Raymond

NEW YORK, Nov 14 (Reuters) - National CineMedia and Screenvision LLC have agreed to put their proposed merger on hold until a court rules on a U.S. government lawsuit that claims it would create a movie advertising monopoly, a lawyer for National CineMedia said Friday.

The disclosure came at a hearing before U.S. District Judge Analisa Torres in Manhattan, who scheduled April 13 for a trial in the Justice Department’s challenge filed on Nov. 3.

“We have agreed that the defendants will not close the transaction pending the decision of the court,” said Paul Friedman, a lawyer for National CineMedia.

National CineMedia had hoped to complete the merger in 2014, Chief Executive Kurt Hall said on an Aug. 5 conference call.

Justice Department representatives did not immediately respond to requests for comment.

In its lawsuit, the Justice Department contends the proposed deal announced in May would combine the only two major cinema advertising networks in the United States.

The companies create 20-minute series of ads and entertainment segments directed at captive audiences before movie trailers are shown, the Justice Department said. The merged company would serve 88 percent of all U.S. movie theater screens, it said.

The companies plan to defend their merger, arguing that what the government calls a “monopoly” over cinema advertising reflects less than 1 percent of the video advertising market.

Hall said in a statement on Friday the merger would offer the best option to increase advertising revenue for theaters “while allowing us to better compete in the video advertising marketplace.”

In a court filing Thursday, both sides said they were open to a settlement and any demand that would allow the merger to proceed.

Torres said Friday she would have a federal magistrate judge contact the parties to assist in any settlement talks.

National CineMedia is partly owned by three movie theater chains: Regal Entertainment Group, AMC Entertainment Holdings Inc and Cinemark Holdings Inc. It shows ads on about 20,000 movie screens out of 39,000 total in the United States.

Screenvision sells ads on 14,300 U.S. movie screens. Carmike Cinemas Inc, the fourth-largest exhibitor in the United States, owns 19 percent of Screenvision.

The case is U.S. v. National CineMedia Inc, U.S. District Court, Southern District of New York, No. 14-08732. (Reporting by Nate Raymond in New York; Additional reporting by Diane Bartz in Washington and Jonathan Stempel in New York; Editing by Jeffrey Benkoe and Richard Chang)

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