PVR to spend ~8.5 billion to acquire SPI Cinemas

Multiplex chain PVR on Sunday said it would buy SPI Cinemas, largest movie exhibitor in the south, in a cashcum-stock deal. SPI Cinemas, which has a strong presence in key markets of Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Kerala and Mumbai, runs brands like Sathyam Cinema, Escape, Palazzo, The Cinema and S2.

PVR said it would acquire 222,711 equity shares, or 71.7% stake, in SPI Cinemas from shareholders for ~6.33 billion. It will also issue 1.6 million equity shares of PVR, constituting ~3.3 per cent of the diluted paid up equity share capital of PVR, for the rest of the stake. At ~1,317.2 per share, this translates to ~2.1 billion, taking the deal value to just short of ~8.5 billion.

PVR will be funding the cash transaction through a combination of internal accruals, new debt issuance and a deferred consideration off ~1 billion, payable on the achievement of certain milestones. EY India was the exclusive financial advisor on the transaction.

Kiran M Reddy and Swaroop Reddy, owners of SPI Cinemas, will continue to remain associated with the business. SPI Cinemas has a network of 76 screens (68 operational and eight to commence operations soon) across 17 properties in 10 cities. Over 100 more screens are expected to be rolled out over the next five years.

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 ~4.1- 4.2 billion. SPI Cinemas’ existing debt is ~1.6 billion. With this acquisition, PVR’s total screen count will increase to 706 screens across 152 properties in 60 cities. The acquisition will also propel PVR as the seventh largest cinema exhibitor in the world, in terms of annual admissions at its theatres, which is expected to be in excess of 100 million.

The transaction is expected to close in the next 30 days and the merger process is expected to be completed in next 9-12 months.

Ajay Bijli, chairman and managing director, PVR, said the acquisition will make PVR the undisputed leader in the southern market, which is highly underpenetrated in terms of multiplexes.