Cineworld doubles in size to become new Europe cinema mogul
(Reuters) - British cinema operator Cineworld Group said it would buy Poland-based Cinema City International's movie theatre 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 in Poland.
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 theatre operator Picturehouse in 2012.
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 Stock Exchange.
(Writing by Karen Rebelo in Bangalore; Editing by Supriya Kurane and Kirti Pandey)