This story first appeared in DNA Money edition on Friday, November 30, 2012.
Film exhibition firm PVR has become the largest multiplex operator in the country, pipping Inox-Fame combine and Big Cinemas to the post.
The company on Thursday announced that it has acquired the Kanakia family’s 69.27% stake in BSE-listed Cinemax India at Rs 203.65 per share, totalling Rs 394.97 crore, through its wholly owned subsidiary Cine Hospitality Pvt Ltd.
PVR currently has 213 screens across 46 theatres. Add to this Cinemax’s 138 and the screen count increases to 351 following the deal, bringing it closer to its target of 500 screens in the next three years.
“The proposed acquisition of Cinemax will create the largest movie exhibition chain in India,” Ajay Bijli, promoter of PVR said in a statement.
On his part, Rasesh Kanakia, promoter of Cinemax, said, “The deal will enable us to ensure greater focus on our real estate and hospitality businesses.”
PVR has also made an open offer for acquiring a further 26% stake under SEBI rules.
If the open offer is fully successful, it is likely to spend an additional Rs148.26 crore (at offer price of Rs 203.65 per share) to buy 72.80 lakh shares from the public.
The total cost of the acquisition will then be around Rs544 crore.
PVR is likely to part fund this acquisition, through a preferential issue of equity of 1,06,25,205 shares at a price of Rs 245 per share amounting to Rs 260 crore to its promoters, existing investor L Capital and Renuka Ramanathan-led private equity investor Multiples Alternate Asset Management (Multiples).
Through the issue, Multiples will invest around Rs 153 crore, L Capital would invest around Rs 82.3 crore and promoters would invest around Rs 25 crore into PVR. Post the equity dilution, both Multiples and L Capital would own around 15.8% stake each in the company and the promoters will hold 32%.
The management is also holding an extraordinary general meeting in the first week of December to consider and pass a resolution on raising the borrowing limit from Rs 300 crore to Rs 1,000 crore.
Analysts see the Cinemax acquisition move as a positive one for PVR.
“First, PVR will become the largest player in the segment post this acquisition. Secondly, adding the Cinemax screens to its portfolio will not only increase PVR’s revenues but will enhance profitability from Day One as Cinemax is a profitable chain already,” said an analyst with a leading domestic brokerage, requesting anonymity.
Amit Patel, an analyst with Angel Broking, concurred. “This transaction is a positive development for PVR and the price appears to be a very fair value. The impact is clearly visible from the way market has reacted to both the stocks.”
According to industry experts, setting up these many screens on its own would have cost the company around Rs 350 crore, at Rs 2.5-3 crore per unit.
However, it would have had to operate these at a loss for at least 2-3 years until they became profitable.
The PVR stock hit an intra-day high of Rs 275 on the news before closing at Rs 255.45, up around 8% from the previous close.
Shares of Cinemax, on the other hand, gained nearly 5% to close at Rs 184.25 – a new high.
If anything, analysts are not sure how the company will fund the acquisition.
Film exhibition firm PVR has become the largest multiplex operator in the country, pipping Inox-Fame combine and Big Cinemas to the post.
The company on Thursday announced that it has acquired the Kanakia family’s 69.27% stake in BSE-listed Cinemax India at Rs 203.65 per share, totalling Rs 394.97 crore, through its wholly owned subsidiary Cine Hospitality Pvt Ltd.
PVR currently has 213 screens across 46 theatres. Add to this Cinemax’s 138 and the screen count increases to 351 following the deal, bringing it closer to its target of 500 screens in the next three years.
“The proposed acquisition of Cinemax will create the largest movie exhibition chain in India,” Ajay Bijli, promoter of PVR said in a statement.
On his part, Rasesh Kanakia, promoter of Cinemax, said, “The deal will enable us to ensure greater focus on our real estate and hospitality businesses.”
PVR has also made an open offer for acquiring a further 26% stake under SEBI rules.
If the open offer is fully successful, it is likely to spend an additional Rs148.26 crore (at offer price of Rs 203.65 per share) to buy 72.80 lakh shares from the public.
The total cost of the acquisition will then be around Rs544 crore.
PVR is likely to part fund this acquisition, through a preferential issue of equity of 1,06,25,205 shares at a price of Rs 245 per share amounting to Rs 260 crore to its promoters, existing investor L Capital and Renuka Ramanathan-led private equity investor Multiples Alternate Asset Management (Multiples).
Through the issue, Multiples will invest around Rs 153 crore, L Capital would invest around Rs 82.3 crore and promoters would invest around Rs 25 crore into PVR. Post the equity dilution, both Multiples and L Capital would own around 15.8% stake each in the company and the promoters will hold 32%.
The management is also holding an extraordinary general meeting in the first week of December to consider and pass a resolution on raising the borrowing limit from Rs 300 crore to Rs 1,000 crore.
Analysts see the Cinemax acquisition move as a positive one for PVR.
“First, PVR will become the largest player in the segment post this acquisition. Secondly, adding the Cinemax screens to its portfolio will not only increase PVR’s revenues but will enhance profitability from Day One as Cinemax is a profitable chain already,” said an analyst with a leading domestic brokerage, requesting anonymity.
Amit Patel, an analyst with Angel Broking, concurred. “This transaction is a positive development for PVR and the price appears to be a very fair value. The impact is clearly visible from the way market has reacted to both the stocks.”
According to industry experts, setting up these many screens on its own would have cost the company around Rs 350 crore, at Rs 2.5-3 crore per unit.
However, it would have had to operate these at a loss for at least 2-3 years until they became profitable.
The PVR stock hit an intra-day high of Rs 275 on the news before closing at Rs 255.45, up around 8% from the previous close.
Shares of Cinemax, on the other hand, gained nearly 5% to close at Rs 184.25 – a new high.
If anything, analysts are not sure how the company will fund the acquisition.
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