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By Arathy S Nair
(Reuters) - Britain's Cineworld Group Plc sealed an agreement to buy larger U.S. peer Regal Entertainment Group on Tuesday for $3.6 billion in cash, a deal that would create the world's second largest movie theatre operator.
The takeover would put the combined company in a 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.
Movie theatres have been struggling to win back viewers as competition from digital streaming platforms draws movie-goers away.
Cineworld 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 Reuters.
Rival AMC is majority owned by China's Dalian Wanda Group which has bought a slew of cinema assets around the world, including taking a controlling stake in U.S. film studio Legendary Entertainment last year.
The approach by Cineworld 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.
Cineworld 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.
Cineworld 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 a step-change in profitability and cash flow for Cineworld, "the long-term investment proposition had fundamentally changed as a result of higher debt and earnings becoming heavily dominated by mature markets," Peel Hunt analysts wrote.
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(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.)