Multiplex chain operator PVR today said it will acquire upto 95.27 per cent stake in Cinemax India, a Kanakia Group firm which is into movie exhibition business in India, in a deal worth about Rs 543 crore.
According to the agreement, PVR's wholly-owned subsidiary Cine Hospitality would acquire 69.27 per cent stake owned by the promoter group of Cinemax at a price of Rs 203.65 for an all cash consideration of Rs 395 crore.
As per SEBI rules, this will be followed by an open offer for an additional 26 per cent (up to 72.80 lakh equity shares) at Rs 203.65 per share, taking the total deal size to about Rs 543 crore.
PVR is also raising Rs 260 crore through a preferential issue of equity shares to its promoters, existing investor, L Capital and new private equity investor, Multiples Alternate Asset Management (MAAM).
"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 that accrue from the larger scale of operations of the combined network," PVR Chairman and Managing Director Ajay Bijli told reporters here.
The acquisition will help PVR have market leadership in the movie exhibition segment in India with a combined strength of 351 screens at 85 locations.
The PVR scrip today closed 7.83 per cent higher at Rs 255.45, while Cinemax shares closed at Rs 184.25, up 4.99 per cent from their previous close on the BSE.
PVR currently has 46 operational properties, with 213 screens and a seating capacity of 50,655 seats. Cinemax has 39 operational properties, with 138 screens and a seating capacity of 33,535 seats.
Asked if Cinemax would be delisted, Bijli said there were no such plans. "The two brands -- PVR and Cinemax Ė would continue to exist independently. We are still working on the details of how to take it forward," he added.
Bijli said the cinema exhibition space was ready for consolidation and that it would continue to look for opportunities.
In February 2010, another cinema chain Inox had bought majority stake in Fame India by buying promoter stake (for Rs 44 crore) and an open offer.
Cinemax promoter Rasesh Kanakia said the company's exhibition business would benefit from consolidation as large scale strengthens competitive advantage as well as significantly enhances operational efficiencies.
"This transaction enables realisation of such benefits and would create significant value for all the shareholders of Cinemax. The deal will enable us to ensure greater focus on our real estate and hospitality businesses," Kanakia said.
On the fund raising, PVR said it will undertake a preferential issue of 1,06,25,205 equity shares at a price of Rs 245 per shares amounting to Rs 260 crore to its promoters, L Capital and new private equity investor, MAAM.
MAAM will invest about Rs 153 crore, L Capital about Rs 82.3 crore and the promoters would infuse about Rs 25 crore into the company, PVR CFO Nitin Sood said.
Post the above dilution, both MAAM and L Capital (from 10 per cent previously) would own about 15.8 per cent stake each. The promoters holding will come down to 32 per cent stake from 40 per cent earlier in PVR, Sood said.