|
The $23-a-share acquisition will transform FTSE
250-listed Cineworld into the second biggest cinema chain in the
world by number of screens, with 9,542 in Europe and the United
States. However, it has confounded expectations among some
shareholders that the company would pursue smaller acquisitions
in Europe and could even return cash to investors.
Richard Marwood, a fund manager at Royal London Asset Management
(RLAM), which is Cineworld's fourth-biggest shareholder with a
3.9 percent stake according to Thomson Reuters data, said the
deal was "a bit of a surprise".
"We've been slightly taken aback by the region – the fact that
they're going to the U.S. – and also just the sheer scale of
what it is they’re tackling," he told Reuters.
The takeover comes at a difficult time for the film industry,
which is wrestling with falling cinema attendances in the United
States as consumers' viewing habits change amid the growing
popularity of streaming services such as Netflix.
It also marks another stage of consolidation among cinema
operators that has seen U.S. firm AMC Entertainment Holdings
acquire Stockholm-based Nordic Cinema Group, the UK's Odeon &
UCI and America's Carmike Cinemas.
Shares in Cineworld have tumbled by 21.5 percent since the
British company said on Nov. 28 that it would require a
“material equity raise” to help finance the transaction, after
Reuters reported it was in talks with Regal.
When the two companies announced they had agreed a deal on Dec.
5, Cineworld confirmed it would fund the takeover by way of a
1.7 billion-pound rights issue and with debt.
That will see its leverage jump to about four times net debt to
earnings before interest, taxes, depreciation and amortization,
once the latter is adjusted for the $100 million of annualized
pre-tax synergies the company expects from the deal.
The group's leverage stood at 1.6 times at the end of last year.
Marwood said the Regal takeover changes "the debt profile" of
Cineworld "quite dramatically".
"The gearing is probably the aspect that makes me slightly
uncomfortable," he said. "But is this a management team that I
would back to do a good deal and make money for shareholders?
Yes it is."
RLAM joins Jupiter Asset Management, a small Cineworld
shareholder with a 0.3 percent stake according to Thomson
Reuters data, in raising questions about the deal.
Jupiter fund manager Alastair Gunn said there were two reasons
why he was unhappy with the takeover.
"First, they have taken on a lot of debt at a point in the
economic cycle when I don't consider it prudent to do so," Gunn
said.
"Second, with the U.S., Cineworld is buying into the most mature
market in the world," he said, adding that he believed other
countries would present "more growth opportunity".
Cineworld is led by chief executive Mooky Greidinger and the
Greidinger family holds a 28 percent stake in the company
through their vehicle Global City Holdings.
Global City and Cineworld's directors, who hold about 0.9
percent of the shares, have said they will support the
acquisition at a shareholder vote on the deal.
A spokesman for Cineworld did not return requests for comment.
(Reporting by Ben Martin; Editing by Susan Fenton)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
|
