British cinema operator Cineworld Group said it would
buy Poland-based Cinema City International's movie theater business,
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, making
the company the second largest player in Europe after private
equity-owned Odeon & UCI Group.
Cinema City Chief Executive Mooky Greidinger, who will head the
combined company, told Reuters that the chain planned to open
548 screens over the next three years.
Greidinger said some of these projects were already underway and
170 of these screens would be in the United Kingdom.
Cineworld's unlisted British competitor Vue Entertainment bought
Poland's No. 2 multiplex operator Multikino last year.
London-listed Cineworld's Chief Financial Officer Philip Bowcock
said Poland was an attractive market as its economy was growing
faster than those of other eastern European countries such as
Bulgaria, Slovakia and Romania.
The number of people per cinema screen was around 17,000 in
Britain in 2012, while it was nearly double in Poland, according
to data from research firm Dodona.
"Fundamentally, the rationale for the deal centers 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.
Cinema City is the largest operator of multiplex cinemas in
Israel and central and eastern European countries, according to
the company's website. It has a market share of about 35 percent
Cineworld has 102 cinemas across the UK and Ireland. The company
listed on the London Stock Exchange in 2007, when it was owned
by the Blackstone Group.
Cineworld gained access to arthouse film audience through its
acquisition of independent movie theater operator Picturehouse
In November last year, Cineworld said its founder and CEO,
Steve Wiener, would step down in March. Anthony Bloom would
retain his current role as chairman in the combined company.
Cineworld said it would pay Cinema City 272 million pounds ($448
million) in cash and the Polish company will hold 24.9 percent
of Cineworld's shares upon the completion of the deal.
The deal, based on Cinema City's enterprise value of about 503
million pounds, is expected to add to Cineworld's adjusted
earnings per share in full year 2014 and be substantially
accretive thereafter, Cineworld said.
"The acquisition appears to be a genuine attempt to gain
exposure to growth markets, as opposed to simply gaining scale,"
Peel Hunt analyst Nick Batram said.
The deal, which is expected to be completed in 2014, will be
funded through a fully underwritten rights issue to raise about
110 million pounds and through debt.
Barclays was the financial adviser to Cineworld and was also the
joint bookrunner along with JPMorgan Cazenove and Investec.
Cinema City was advised by HSBC.
Cineworld shares rose as much as 9.6 percent, making it one of
the top percentage gainers on the London Stock Exchange on
Friday. At 1306 GMT, the stock was up 8 percent at 424 pence.
Cinema City shares were up 16 percent at 35 zloty on the Warsaw
(Writing by Karen Rebelo in
Bangalore; editing by Supriya Kurane and Kirti Pandey)