On New Year’s Eve, 2001, three separate, publicly traded companies joined together to form Reading International. The merger fused the corporate histories of the three constituents into one, giving the modern-day Reading International an eclectic background, one described by an incongruous medley of businesses that at one point represented the largest corporation in the world. Reading International’s convoluted past involved coal mining, shipbuilding, a massive railroad business, a savings and loan institution, citrus farming, medical device manufacturing, and a supermarket chain, all of which, over the course of nearly 200 years, led to the company’s manifestation in the 21st century as an operator of multiplex cinemas and off-Broadway theatres. The story of Reading International’s development branched off into numerous, divergent directions, but the start of its story began at one point, in Pennsylvania in 1833.
Reading International took its name from the railroad known to anyone familiar with the board game Monopoly. Reading Railroad was established as The Philadelphia & Reading Railroad Company in 1833, founded to transport anthracite coal mined in Pennsylvania to destinations in Pennsylvania, New Jersey, and Delaware. At the time, coal was a major source of energy in the United States, making The Philadelphia & Reading one of the most important and wealthy companies in the country. The railroad poured its profits into other businesses, delving into coal mining, iron making, shipbuilding, and a host of other businesses. By the 1870s, The Philadelphia & Reading, which owned the P & R Coal and Iron Company, ranked as the largest corporation in the world.
By the end of the 19th century, The Philadelphia & Reading’s greatest threat was from the federal government. Antitrust legislation aimed at breaking up monopolies prompted the railroad’s owners to create a holding company, a company named Reading Company, which, on paper, owned The Philadelphia & Reading and P & R Coal and Iron Company. The tactic worked for a while, but eventually the U.S. Supreme Court ordered the company to separate itself into distinct entities. The breakup of the company in 1924 created the new version of Reading Company, a company solely devoted to operating the railroad.
Reading Railroad, like a handful of other railroad companies, began a gradual downward spiral after World War II. Coal’s value as an energy source waned, replaced by oil, and competition in the freight-hauling business intensified, as railroads, particularly those operating in the eastern United States, lost substantial ground to the trucking industry. Between 1967 and 1972, six major northeastern railroads declared bankruptcy, and Reading was one of the moribund pack, filing for Chapter 11 in 1971. The operation of the rail lines controlled by Reading and those of its fallen brethren were consolidated by a federal government agency and given to the Consolidated Rail Corporation, or Conair, a government-sponsored company that began operating in 1976. Reading, meanwhile, was reduced to making its living primarily by developing some of its historic railroad properties, which consisted, in large part, of real estate holdings. It would be nearly 20 years before Reading sold its last railroad real estate asset, the Reading Terminal Headhouse in downtown Philadelphia, which was sold in 1993.
1980s-90s: A Prelude to Merger
As Reading gradually untangled itself from more than a century of being in the railroad business, its path crossed with that of another company, a company led by James J. Cotter. Cotter, described in the May 22, 1995 issue of the Los Angeles Business Journal as “a figure legendary in Southland big-money circles,” figured as one of the principal leaders of Reading International and, to an extent, the inspiration for its creation. For decades, Cotter had served as a financial lieutenant to the Beverly Hills-based Forman family, a family whose fortune exceeded $500 million. Cotter served as the head of finance and operations for a chain of drive-in movie properties developed by the Forman family between the 1940s and 1960s. (The Forman family purchased real estate near proposed freeway off ramps, a business strategy that proved to be enormously lucrative as a labyrinth of freeways developed in Southern California.)
In 1985, Cotter took control of a company named Craig Corporation. Craig Corporation was known primarily for its involvement in eight-track stereos and for developing an early version of what Sony Corporation unveiled as the Sony Walkman, but Cotter had different ideas for the publicly traded company. When he took the helm in 1985, Cotter converted Craig Corporation to a shell corporation to invest in other companies, emulating the model of famed investor Warren Buffet and his holding company, Berkshire Hathaway. “When you buy Craig today,” an analyst remarked in a May 22, 1995 interview with the Los Angeles Business Journal, “you are really betting on Jim Cotter.” Cotter used Craig Corporation to acquire stakes in a variety of companies, including a 50 percent interest in Stater Bros, a California-based supermarket chain. By the mid-1990s, Cotter’s investments, held by Craig Corporation, included a 47 percent stake in Reading Company. Cotter also held an equity position in another company, the third member of the 2001 merger that created Reading International, Citadel Holding Corporation.
Citadel was a holding company similar to Cotter’s Craig Corporation. The company was formed in 1983, counting as its major asset a Glendale, California-based savings and loan, or thrift, named Fidelity Federal Bank. Fidelity Federal’s main line of business was in real estate, specifically owning and operating commercial real estate. The thrift also provided real estate advisory services. One of its clients was Reading, which by this point described itself as a Pennsylvania-based real estate development company.
Fidelity Federal began to flounder during the early 1990s. The thrift, which held $4 billion assets and operated 42 branch offices, was losing millions of dollars and in danger of being seized by its regulators. To cut itself free from the impending collapse of Fidelity Federal, Citadel spun off the thrift in August 1994 and began looking for better investments elsewhere. Among the investments made by the holding company was a substantial stake in a California citrus farm named Big 4 Ranch, Inc., which Citadel acquired in 1997. The following year, the company took an equity position in a California-based medical devices manufacturer, Gish Biomedical, Inc. In 2000, Citadel entered new investment territory by acquiring real estate properties occupied by movie theaters and theaters that staged off-Broadway productions. The move, one similar to the move made by Reading during the 1990s, set the stage for the 2001 merger creating Reading International.
While Citadel re-positioned itself after Fidelity Federal’s fortunes faded, Reading pursued the development of its real estate business. The company began acquiring, developing, and operating real estate properties during the 1990s, focusing its efforts on properties occupied by cinema exhibitors and live theatre operators. The majority of the company’s holdings were located thousands of miles away from the company’s historical native ground of Pennsylvania’s coal mines. Reading entered Australia in 1995 and New Zealand in 1997, developing a chain of multiplex cinemas that operated under the Reading banner and exhibited mainstream films. Domestically, Reading pursued a more offbeat business direction, acquiring an art-house theatre in Manhattan in 1996 that operated under the name Angelika Film Center. The company also grafted its oceanic operating strategy onto Puerto Rico, acquiring and expanding a chain of multiplex cinemas on the U.S. commonwealth island.
Merger in 2001
At the beginning of the 21st century, Reading Company, Craig Corporation, and Citadel, each intertwined with one another on some level, decided to join together and eliminate the substantial overlap in stock ownership, management, and control among the companies by becoming one company. The companies decided to focus on the business strategy pursued by Reading, fashioning itself as a cinema and live theatre exhibition company with a strong focus on the development and holding of real estate assets. For experience in this area, the consolidated companies turned to Cotter, who had been involved in the movie theater business for decades. Cotter was named Chairman and Chief Executive of the merged company, owning 30 percent of the new entity. When the merger, or the “consolidation transaction,” was completed, Citadel technically was the surviving entity, but the name of the merged company became “Reading International Inc.” because the majority of the operating assets initially belonged to Reading. In the wake of the merger, those businesses beyond the new company’s scope were sold. In 2002, the stake in Big 4 Ranch, Inc. was divested, followed by the sale of Gish Biomedical, Inc. in 2003.
With Cotter at the helm, Reading International began building on the business foundation established at the beginning of 2002. There was, however, one area of the company’s business that it no longer cared to develop further. Reading International executives decided to abandon plans for further expansion in Puerto Rico, where the company owned and operated six cinemas. After a competing cinema chain gained control of more than 80 percent of the Puerto Rican market, Reading International officials decided to exit the market and, as soon as the right opportunity presented itself, sell the company’s Puerto Rican assets, which totaled $3.1 million. Reading International intended to focus on expanding its business in the United States, Australia, and New Zealand.
As Reading International entered the mid-2000s, the company stood as a nearly $100 million-in-sales company. By the end of 2003, its presence in Australia and New Zealand consisted of 18 cinemas with 124 screens. In the United States, the Angelika Film Center in Manhattan represented the flagship of what had become a small chain operating under the name Angelika Film Centers & Café. By the end of 2003, the Angelika chain consisted of nine cinemas with 53 screens, maintaining a presence in New York City, Dallas, and Houston. The company’s live theatre properties consisted of seven off-Broadway style theatres located in New York City and Chicago.
The company’s activity in 2004 served as a blueprint for its future expansion, with much of its efforts focused on developing real estate. During the year, Reading International was building an 82,000-square-foot shopping center in Newmarket, Australia, a suburb of Brisbane. The company also was finishing the construction of a 150,000-square-foot Entertainment Themed Retail Center (ETRC) project in Wellington, New Zealand. Outside Melbourne, in the suburbs of Moonee Ponds and Burwood, preliminary plans were being developed for two potential ETRC projects.