Multiplex chain PVR Ltd on Sunday announced the acquisition of South India-based SPI Cinemas Private Ltd, which has a presence in the key markets of Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Kerala, and Mumbai.
In a cash-cum-stock deal, PVR will acquire 222,711 equity shares of SPI Cinemas, constituting 71.7 per cent of SPI, from existing shareholders for a total consideration of Rs 6.33 billion, and issue 1.6 million equity shares of PVR Limited, constituting 3.3 per cent of the diluted paid up equity share capital of PVR. At Rs 1,317.2 per share, this translates to Rs 2.1 billion, taking the deal value to just short of Rs 8.5 billion. EY India was the exclusive financial advisor on the transaction.
PVR will be funding the cash transaction through a combination of internal accruals, new debt issuance, and a deferred consideration of Rs 1 billion, which will payable on the achievement of certain milestones. Both of SPI's key executives, Kiran M Reddy and Swaroop Reddy, will continue to remain associated with the business.
SPI Cinemas has a network of 76 screens (68 operational and eight expected to commence operations soon) across 17 properties and 10 cities. Further, the company has a signed pipeline of over 100 screens, which are expected to be rolled out over the next five years.
The chain has 31 operational screens in Chennai, including the iconic Sathyam Cinema, which was established in 1974 and is a household name in the local market. The other brands under which SPI operates cinemas include Escape, Palazzo, The Cinema and S2. The company has the highest occupancies across all organised multiplex chains in the country and is expected to achieve annual admissions of approximately 16-17 million in FY19 and revenues of approximately Rs 4.1- 4.2 billion. SPI is also one of the key movie distributors in the state of Tamil Nadu. SPI Cinemas' existing debt is Rs 1.6 billion.
With this acquisition, PVR's total screen count will increase to 706 screens across 152 properties and 60 cities. The acquisition will also propel PVR to becoming the 7th largest cinema exhibitor in the world in terms of annual admissions at its theatres, which are expected to be in excess of 100 million.
The transaction is expected to be closed in the next 30 days and the merger process is expected to be completed in the next 9-12 months.
Ajay Bijli, chairman cum managing director, PVR Ltd, said, "The acquisition of SPI Cinemas is of significant strategic value for PVR and will further cement our market leadership position in India. The acquisition will make PVR the undisputed leader in the South Indian market and provide an attractive platform for us to expand in that geography, which currently is highly underpenetrated in terms of multiplexes. Both Kiran and Swaroop have done a tremendous job in building some of the best cinemas in the country and I look forward to their continued partnership with PVR as we take the business to the next level. This transaction is a significant step in helping us achieve our vision of having 1,000 screens by 2020."
Kiran Reddy of SPI Cinemas said, "SPI Cinemas has been revolutionising the movie watching experience for its patrons by consistently bringing in world-class technology and innovative offerings. We are excited to now partner with the largest Indian multiplex chain, PVR, as this combines two proven business models and will create significant value for moviegoers as well as all the stakeholders."