UPDATE 1-Cineworld in Polish deal to create Europe's No. 2 cinema chain
* British company to buy Cinema City's movie businesses
* Cinema City to get 272 mln stg in cash, hold 24.9 pct of Cineworld
* Deal to add to Cineworld's adjusted earnings per share in 2014
* Cineworld shares up 7 pct
By Esha Vaish
Jan 10 (Reuters) - British cinema operator Cineworld Group said it would buy Poland-based Cinema City International's movie theatre business to create the second largest cinema chain in Europe.
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.
Cineworld, the UK's only listed cinema chain, said the deal is based on Cinema City's enterprise value of about 503 million pounds.
The deal is expected to add to Cineworld's adjusted earnings per share in full year 2014 and be substantially accretive thereafter, the company said.
"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 capitalise 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 such as Slovakia, Czech Republic and Bulgaria, according to the company's website.
The deal, expected to be completed in March, will create a chain of 201 cinemas with 1,852 screens, making Cineworld the second largest player in Europe after Odeon Cinemas Ltd .
Cinema City Chief Executive Mooky Greidinger told Reuters the combined company planned to open 548 screens over the next three years.
Greidinger, who will head the combined company, said some of these projects were already underway and 170 of the screens would be in the United Kingdom.
Cineworld's unlisted British competitor Vue Entertainment bought Poland's No. 2 multiplex operator Multikino last year.
Cineworld Chairman Anthony Bloom will retain his current role in the combined company.
In November last year, Cineworld said its founder and CEO, Steve Wiener, would step down in March.
Cinema City's film distribution business is also a part of the deal. The Polish company, which will keep its property interests, will stay listed in Warsaw, Cineworld spokeswoman Elly Williamson told Reuters.
Cineworld said it identified cost synergies of 2 million pounds, the majority of which are expected to be realised in financial year 2014.
The deal will be funded through a fully underwritten rights issue to raise about 110 million pounds and through debt.
"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.
Cineworld shares were up 7 percent at 419 pence on the London Stock Exchange at 1020 GMT. Cinema City shares rose 16 percent to 35 zloty on the Warsaw Stock Exchange.