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UK's Cineworld targets U.S. expansion with $3.6 billion deal to buy Regal Entertainment


By Arathy S Nair

(Reuters) - Britain's Plc sealed an agreement to buy larger U.S. peer Entertainment on Tuesday for $3.6 billion in cash, deal that would create the world's second largest movie theatre operator.

The takeover would put the combined company in better position to take on industry leader AMC Entertainment Holdings Inc , and give it more scale to fight growing competition from Netflix Inc, Apple Inc and other digital outlets.

is three times larger than by market value and the combined company would have about 9,542 screens, with 7,315 screens in the United States.

Movie theatres have been struggling to win back viewers as competition from digital streaming platforms draws movie-goers away.

Chief Executive Mooky Greidinger brushed aside those concerns.

"When they go to the cinema, they go to the cinema and who loves to go to the cinema more than the Americans?," Greidinger told

Greidinger said he expects to boost margins and revenue at Regal, adding that currently has margins of 22 percent, while has margins of about 19.6-19.7 percent.

Rival AMC is majority owned by China's Dalian Wanda which has bought slew of cinema assets around the world, including taking controlling stake in U.S. film studio Legendary Entertainment last year.

The approach by was considered well-timed as shares in the U.S. company have plunged more than 20 percent over the last year on concerns over stagnant admissions at theatres.

The deal value of $23 per share represents premium of about 12 percent to Regal's closing price on Monday and implies an enterprise value - equity plus debt - of $5.8 billion.

shares have risen 13.6 percent since first reported in November that had approached over potential deal. shares have fallen about 20 percent in the period.

said it expected the deal to "strongly" add to earnings in the first full year following completion, currently expected in the first quarter of 2018.

The combined company is expected to deliver pre-tax benefits of $100 million, as well as additional annual benefits of $50 million, the companies said.

said it expected to fund the deal through rights issue to raise about 1.7 billion pounds ($2.3 billion), with the rest provided by committed debt facilities and existing

expects to be able to maintain its existing dividend policy after the deal closes.

However, brokerage Peel Hunt cut its recommendation to "hold" from "add", citing long-term concerns.

While the deal provided step-change in profitability and flow for Cineworld, "the long-term investment proposition had fundamentally changed as result of higher debt and earnings becoming heavily dominated by mature markets," Peel Hunt analysts wrote.

shares were down 2.5 percent, while shares were up 6.1 percent in pre-market trading.

($1 = 0.7449 pounds)

(Reporting by Arathy S Nair in Bengaluru; Editing by Tom Pfeiffer, Mark Potter and Adrian Croft)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, December 05 2017. 17:52 IST