UK’s Cineworld in talks to buy Re­gal for US$3bil

The Star Malaysia - StarBiz - - Digital Trend -

LON­DON: UK’s Cineworld Group Plc is in talks to pur­chase Re­gal En­ter­tain­ment Group, the movie-theatre chain con­trolled by bil­lion­aire Philip An­schutz, for more than US$3bil to dou­ble its size and cre­ate a big­ger in­ter­na­tional ri­val to in­dus­try leader AMC En­ter­tain­ment Hold­ings Inc.

The com­pa­nies are ne­go­ti­at­ing a price for Re­gal of US$23 a share, they said in sep­a­rate state­ments, con­firm­ing ear­lier re­ports by Reuters and Bloomberg.

The talks could still fall apart, the com­pa­nies said. Knoxville, Ten­nessee-based Re­gal had been val­ued at US$2.83bil based on trad­ing ear­lier Tues­day, while Cineworld has a mar­ket cap­i­tal­iza­tion of £1.8bil.

The deal would al­low Cineworld to ex­pand be­yond its home mar­ket and add thou­sands of screens as the in­dus­try faces in­ten­si­fy­ing com­pe­ti­tion from on­line-video providers.

A deal to re­shape Re­gal, the sec­ond-big­gest cin­ema chain in the US, re­vives an un­suc­cess­ful at­tempt to sell the com­pany in 2014.

Re­gal and its ri­vals in the US the­ater in­dus­try are un­der pres­sure as stream­ing ser­vices like Net­flix Inc in­vest heav­ily in orig­i­nal movies, giv­ing au­di­ences more rea­sons to stay home.

Movie at­ten­dance has stag­nated in the US, and many films this year have failed to meet ex­pec­ta­tions at the box of­fice.

The sum­mer sea­son – usu­ally the most lu­cra­tive for the in­dus­try – was the worst since 2006.

Shares of Re­gal surged as much as 17% on Tues­day be­fore be­ing halted, and other US cin­ema chains also rose.

Cineworld de­clined 6.6% to 649 pence at 8:01 am in Lon­don.

Cineworld and Re­gal could “sense an op­por­tu­nity to as­sume the role of the­ater con­sol­ida­tor now that AMC is on the side­lines with an over-lever­aged bal­ance sheet,” Bloomberg In­tel­li­gence an­a­lyst Paul Sweeney said.

Cineworld said it would fund the acquisition with debt and a stock sale.

Its share­holder Global City Hold­ings, which has a 28% stake, has com­mit­ted to sub­scribe to the equity raise.

The pur­chase of Re­gal would be clas­si­fied as a re­verse takeover, and a deal would re­quire Cineworld share­holder ap­proval, the com­pany said.

AMC has grown with two ma­jor ac­qui­si­tions, first Carmike Cin­e­mas in the US, and Odeon & UCI Cin­e­mas as well as Nordic Cin­ema Group in Europe.

The com­pany is con­sid­er­ing an ini­tial pub­lic of­fer­ing of its Euro­pean cin­ema op­er­a­tions that could help AMC re­duce its US$4.29bil in bor­row­ings.

Re­gal, with 7,379 screens, had hired Mor­gan Stan­ley three years ago to eval­u­ate op­tions, then an­nounced in early 2015 it wouldn’t try to find a buyer.

The com­pany has ex­panded its mar­ket share this year by buy­ing smaller chains, in­clud­ing two San­tikos the­aters in Hous­ton and seven War­ren The­aters.

Euro­pean chains have been draw­ing at­ten­tion from for­eign buy­ers, with South Korea’s CJ CGV Co say­ing ear­lier this month it may bid for UK chain Vue In­ter­na­tional.

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