PVR Cinemas to acquire Cinemax for Rs 395 cr

Values Cinemax at about Rs 570 cr deal to make PVR top cinema exhibition player


BS Reporter Mumbai
Gurgaon-based multiplex major PVR is set to buy 69.27 per cent promoters’ stake in rival Cinemax India for Rs 394.98 crore at Rs 203.65 a share, valuing the company at about Rs 570 crore.
The deal would make PVR the top player in the Indian cinema exhibition space, surpassing Inox Leisure (along with Fame Cinemas) and Big Cinemas. PVR would now have 351 screens across 85 locations and leadership positions in 10 key markets across the country.
Today, after hitting the upper circuit, Cinemax shares closed at Rs 184.25 on the Bombay Stock Exchange, a rise of 4.99 per cent against the previous close. The PVR stock jumped 13 per cent, closing at Rs 255.45, about 7.8 per cent higher than the previous close.

Multiplex companyTotal screens
PVR (with Cinemax)351 (213+138)
Inox Leisure (with Fame India)256
Big Cinemas253
Fun Cinemas76
Cinepolis India 44
DT Cinemas29
Source: Companies
Two years ago, PVR had attempted to buy DLF-owned DT Cinemas, which accounted for 26 screens at that time, for Rs 60 crore in a stock-cum-cash deal. However, the deal didn’t materialise.
The Cinemax acquisition is being carried out through PVR’s wholly-owned subsidiary, Cine Hospitality. To raise the required funds, PVR has announced a preferential issue of 1,06,25,205 equity shares at Rs 245 each, amounting to Rs 260 crore, to promoters, investor L Capital and new private equity investor Multiples Alternate Asset Management. Under the preferential issue of equity shares, Multiples would invest Rs 153 crore, L Capital about Rs 82.3 crore and the promoters would invest about Rs 25 crore. After the dilution, Multiples and L Capital would hold about 15.8 per cent stake each in the company. Promoter holding would fall to 32 per cent.
Ajay Bijli, chairman & managing director of PVR, said, “To achieve market leadership in the Indian exhibition business, PVR has been on a rapid expansion mode through organic, as well as inorganic routes. Today, with the proposed acquisition of Cinemax, we hope to create the largest movie exhibition chain in India. We are excited about the synergy potential and cost benefits accruing from the larger scale of operations of the combined network. Cinemax has a premium portfolio of multiplex screen across India and has been a market leader in western India.”
Rasesh Kanakia, a promoter in Cinemax, said, “We believe the exhibition business benefits from consolidation, as the large scale strengthens competitive advantage and significantly enhances operational efficiencies. This transaction enables the realisation of such benefits. It would create significant value for all Cinemax shareholders. The deal would enable us to focus more on our real estate and hospitality businesses.”
“This deal creates leadership in the multiplex industry. Given the dominant position of the proposed combination in the attractive geography of western India, it is expected to derive value and synergies by negotiating content costs to lower levels, which would revalidate the valuation over time,” said Jagat Dave, director, Ambit Corporate Finance.
Renuka Ramnath, founder of Multiples and former managing director and chief executive of ICICI Ventures, said, “We are delighted to partner PVR at this stage, as the company catapults into a new orbit. Given my longstanding relationship with Ajay Bijli and PVR and our deep understanding of the space, Multiples was able to move quickly and support the company. This is a perfect example of how private equity partnerships transcend different stages in the lifecycle of a company.”
For the deal, Axis Capital was the investment banker for PVR, Axis Finance was the arranger for finance and Amarchand & Mangaldas & Suresh A Shroff & Co was the legal advisors. Trust Investment Advisors was the investment banker and Wadia Ghandy & Co the legal advisor for Cinemax.

First Published: Nov 30 2012 | 12:26 PM IST

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