Putting an end to months of speculation, PVR Cinemas on Thursday announced that it will acquire 69.27 per cent stake in Cinemax India for Rs 395 crore.
The deal once concluded will make PVR the largest movie exhibition chain in the country.
PVR will be acquiring Cinemax promoter’s stake at Rs 203.65 a share through a wholly owned subsidiary, Cine Hospitality representing a premium of about 10 per cent on the closing price of the shares of Cinemax on the BSE on Thursday.
PVR will be also acquiring additional 26 per cent stake through an open offer from public shareholders according to SEBI takeover regulations, PVR said in a statement.
“This acquisition is a strategic move and will take our total screens to 351 across 85 locations giving us access to eight new markets.
“It will also give us leadership in 10 most significant markets across the country. Cinemax will continue to operate as a separate entity and its cinemas will not be re branded,” said Ajay Bijli, Chairman and Managing Director of PVR, hinting that Cinemax may not be delisted.
He added that the PVR sees cost benefits and synergy potential in the deal through the larger scale of operations.
“We expect to increase the tally of our screens to about 400 screens by the end of this fiscal year,” Bijli said.
The deal will be funded through a mix of debt and equity and the company’s board also approved issuing of preference shares.
The company has raised funds through current investor L Capital and a new private equity player - Multiples Alternate Asset Management. PVR has issued preferential shares of 1,06,25,205 shares at Rs 245 a share amounting to Rs 260 crore to the promoters (PVR promoters), L Capital and Multiples Alternate.
While Multiples will invest Rs 153 crore, L Capital would invest approximately Rs 82.3 crore and the promoters investment will be about Rs 25 crore into PVR Ltd, which in turn will acquire stake in Cinemax through its wholly owned subsidiary.
“Post the above dilution, both Multiples Private Equity and L Capital would own about 15.8 per cent stake each in PVR and the promoters will hold 32 per cent stake in the company,” it said.
Rasesh Kanakia, promoter of Cinemax, said the exhibition business benefits from the consolidation as large scale strengthens competitive advantage and enhances operational efficiencies.
He said the Kanakia Group will now focus on its core business of real estate and hospitality.