PVR Cinemas Acquires 69.3% Stake In Cinemax; Open Offer; Implications

Multiplex Chain PVR Cinemas has inked a definitive sale agreement to acquire 69.27% stake in Cinemax India, through its wholly owned subsidiary Cine Hospitality Private Limited.

This acquisition follows earlier reports of PVR Cinemas looking to acquire 69% stake in Cinemax India, owned by promoters Rashesh Kanakia and family and following it up with an open offer for 26% company stake.

As per the agreement, PVR Cinemas completed this acquisition for a total sale consideration of Rs 394 crore (Rs 394,97,54,278) at a stock price of Rs 203.65 per equity share. The company is also looking to acquire an additional 26% stake through an open offer to the public shareholders of Cinemax.

Open Offer: Enam Securities Pvt Ltd, which has been appointed as the manager of the open offer, informed BSE that PVR Cinemas plans to acquire 72.8 lakh fully paid-up equity shares of face value of Rs. 5 each, representing 26% of the total diluted voting equity share capital, from the public shareholders of Cinemax India Limited at a price of Rs 203.65 per equity share. It noted that the offer price will be paid in cash in accordance with SEBI regulations of 2011.

Cinemax Investors: Besides Kanakia family which owned 69.27% stake in Cinemax India prior to the acquisition, other prominent investors in Cinemax India included (pdf) ICICI Prudential Life Insurance Company which owned 6.7% of the company stake and Mavi Investment Fund Limited which owned 1.2% stake.

Where The Money Comes From? A Times of India report suggests that PVR promoters will invest Rs 25 crore in this transaction and dilute their stake from 40% to 32%, while an existing PVR investor, L Capital will invest Rs 82.3 crore to increase its stake from 10% to 15.8% and a new private equity firm Multiples Alternate Asset Management will invest Rs 153 crore to secure 15.8% stake in PVR.

What Will They Get? This acquisition will allow PVR Cinemas to extend their operations to eight new markets in India and operate 351 screens across the country. According to the company website, PVR Cinemas currently operates 213 screens across 27 different cities in India while Cinemax India operates 139 screens across 39 theaters in India, which includes 14 theaters in Mumbai and theaters in Ahmedabad, Delhi, Nagpur, Hyderabad, Kolkata, Kanpur, Thane, Baroda, Pune, Bangalore and Surat.

Implications: It will be interesting to see what this acquisition means for online movie ticketing portals like Bookmyshow.com. The portal currently offers online booking for Cinemax theaters but doesn’t offer online booking for PVR Cinemas, which seems to prefer offering the facility only through its own website and mobile apps. It’s quite possible that PVR will withdraw online ticketing for Cinemax theaters from Bookmyshow and restrict it only to Cinemax website, which might affect the total transactions on the Bookmyshow portal.