Cineworld and Regal in blockbuster merger
CINEWORLD yesterday placed a £4.3billion bet on American movie-goers staying loyal to the big screen in the face of home entertainment competition after agreeing to buy Regal Entertainment.
The blockbuster deal, valuing Regal at £2.7billion excluding debt, catapults FTSE 250 chain Cineworld into the North American cinema market, the biggest box office arena worth over $10billion annually since 2008 with more than 1.25 billion admissions each year.
It creates the world’s second biggest cinema operator with 9,542 screens across the US and Europe, behind America’s AMC which last year bought Odeon and UCI in a deal worth £921million.
Cineworld, which currently has over 2,200 screens across 232 sites in the UK, Ireland and European markets including Poland and the Czech Republic, is funding the deal with cash and £3billion of debt as well as issuing new shares worth about £1.7billion.
Regal, which has 561 cinemas in 43 states, posted pre-tax earnings of £468million on revenue of £2.37billion in 2016. Combining the two companies is expected to lead to annual savings and benefits of $150million. Cineworld has boosted its revenues by refurbishing its venues and rolling out VIP sites.
Cinemas are facing tougher competition from streaming sites such as Netflix and Amazon Prime, enabling viewers to watch films at home. US box office takings this summer were at their lowest for several years.
But Cineworld chief executive, Mooky Greidinger, pictured, played down concerns: “When they go to the cinema, they go to the cinema and who loves to go to the cinema more than the Americans?”
He added: “Regal is a great business and provides Cineworld with the optimal platform on which we can continue our growth strategy. Consolidation is an important move forward.”
Peel Hunt analyst, Douglas Jack, said the deal would provide “a step-change in profitability and cash flow”, but warned: “The long-term investment proposition has fundamentally changed as a result of higher debt and earnings becoming heavily dominated by mature markets.” Cineworld shares fell 2½p to 543½p.