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