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PVR set to acquire SPI cinemas in a cash-cum-stock deal valued at over Rs 850 crore

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MUMBAI: After years of on-again-off-again negotiations, Ajay Bijli-led Indias leading multiplex chain PVR Ltd has finally reached an agreement with South Indias largest premium cinema exhibitor SPI Cinemas to acquire the company at an enterprises valuation of over Rs 850 crore.

In a cash and stock deal PVR will acquire SPI Cinemas, which operates brands like Sathyam Cinemas, Escape, Palazzo, The Cinema and S2, in key markets of Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Kerala, and Mumbai.

SPI Cinemas has a network of 76 screens (68 operational and 8 expected to commence operations soon) across 17 properties and 10 cities. The company also has a signed pipeline of over 100 screens which are expected to be rolled out over the next 5 years.

Under the terms of the proposed acquisition, PVR would acquire 71.7% stake in SPI Cinemas from existing shareholders for a total consideration of Rs 633 crore, and will issue 1.6 million new equity shares of PVR, constituting approximately 3.3% of the diluted paid up equity share capital of the company for the remaining stake. At current share price of Rs 1,317 per share, PVR will issue new shares worth over 210 crore.

EY India, the leading firm for media transactions in India, was the exclusive financial advisor on the transaction.

ET had first reported on January 12, 2015 that PVR and SPI Cinemas are in talks and the deal size could be around Rs 750-800 crore. However, the talks failed at that time.

Post the acquisition, PVRs total screen count will increase to 706 screens across 152 properties and 60 cities. The acquisition will also propel PVR as the 7th largest cinema exhibitor in the world in terms of annual admissions at its theatres, which will be in excess of 100 million.

SPI Cinemas, PVR said, has the highest occupancies across all organised multiplex chains in the country and is expected to achieve annual admissions of approx. 16-17 million in FY19 and revenues of Rs 410- 420 crore. SPI is also one of the key movie distributors in the state of Tamil Nadu.

Kiran M Reddy and Swaroop Reddy, owners of SPI Cinemas, will continue to remain associated with the business and provide strategic guidance in integrating the business with PVR and create value for all the stakeholders, the two companies said.

The transaction is expected to be closed in next 30 days and the merger process is expected to be completed in next 9-12 months.

Ajay Bijli, chairman cum managing director, PVR, said “The acquisition of SPI Cinemas is of significant strategic value for PVR and will further cement our market leadership position in India.”

Bijli said the acquisition will make PVR the undisputed leader in the South Indian market and provide an attractive platform to expand in that geography, which currently is highly under-penetrated in terms of multiplexes.

“This transaction is a significant step in helping us achieve our vision of having 1000 screens by 2020,” Bijli said.

“This combines two proven business models and will create significant value for moviegoers as well as all the stakeholders,” said Kiran Reddy of SPI Cinemas.

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