A blockbuster plot hatched by Vue International to merge with Cineworld, its stricken London-listed rival, has stalled.

Sky News understands that Vue has been frozen out of a sale process being run by Cineworld’s advisers, leaving the privately held company unable to pursue discussions about a deal.

It was unclear on Thursday whether the discussions would be revived.

Vue’s founder, Tim Richards, has been attempting to engineer a tie-up between two of the UK’s largest cinema operators, with Cineworld having filed for Chapter 11 bankruptcy protection in the US last summer.

Last week, Sky News revealed that the founder of Picturehouse, the boutique cinema chain now owned by Cineworld, was in talks with Vue about buying it back.

A sale of Picturehouse could have assisted Vue from a competition perspective given its status as one of Britain’s biggest cinema operators.

Cineworld has been running a formal auction of its assets, although it said last month that any sale of its assets was unlikely to realise any value for its shareholders.

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“The company has now received non-binding proposals from a number of potential transaction counterparties for some or all of the group’s business,” it said in a stock exchange announcement.

“None of these proposals involves an all-cash bid for the entire business.”

Vue had lined up financial backing from its new shareholders to help assemble a takeover tilt at Cineworld.

Funds managed by Barings and Farallon Capital Management, as well as at least one other backer, are understood to have agreed to provide capital to Vue’s chief, Tim Richards, to support potential acquisitions.

Cineworld’s shares have slumped by over 90% during the last year, and the entire group now has a market value of less than £45m, reflecting the fact that its investors face being wiped out in any sale.

The cinema industry has been bolstered by the recent release of hits such as the Avatar sequel, while two of the top three biggest films in UK history have been released in the last couple of years – Daniel Craig’s final appearance as James Bond in No Time to Die, and Spiderman: No Way Home.

Mr Richards, who also chairs the British Film Institute, has talked about the post-pandemic era becoming “the second golden age of cinema” as audiences flock back to entertainment destinations.

In the UK, Vue ranks behind only Cineworld and Odeon when it comes to number of sites.

Vue declined to comment, and Cineworld has been contacted for comment.

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