British company to buy Cinema City's movie businesses
The company plans to open 548 screens over next 3 years including 170 in the UK.
LONDON (Reuters) - British cinema operator Cineworld Group will buy Poland-based Cinema City International s movie theatre business for just over 500 million pounds, doubling the number of its cinemas to create the second largest chain in Europe.
Cineworld, the UK s only listed cinema chain, said the deal would create a chain of 201 cinemas with 1,852 screens, lagging only private equity-owned Odeon & UCI Group in Europe.
The cash and share offer will leave Cinema City owning a quarter of Cineworld, which is financing the purchase through a mix of shares, debt and a 110 million pound rights issue.
Investors welcomed the deal, pushing Cineworld shares up nearly 14 percent, making them one of the top gainers on the London Stock Exchange. Cinema City shares jumped more than 17 percent in Warsaw.
"Fundamentally, the rationale for the deal centres around access to developing economies in Europe, and for Cineworld to leverage all its know-how in the multiplex market to capitalize on the opportunities in these territories," N+1 Singer analyst Sahill Shan wrote in a note.
Cineworld said it would pay Cinema City 272 million pounds in cash and the Polish company will hold 24.9 percent of its shares.
The deal was based on an enterprise value for Cinema City of 503 million pounds ($828 million) on a debt-free, cash-free basis, Cineworld said in a statement.
To help fund the purchase, Cineworld plans to sell 48 million shares in an 8-for-25 rights issue at 230 pence per share, a 41 percent discount to their closing price on Thursday.
Cineworld shares traded at 445 pence on Friday afternoon on the London Stock Exchange.
