UK cinema chain Cineworld has agreed to acquire US-based peer Regal Entertainment for $23 per share, adding up to $3.6 billion.
The reverse takeover will give Cineworld access to the US market and create the world’s second-largest cinema chain. The combined companies posted nearly $4.4 billion in revenue in the year to June, as well as $907 million in EBITDA.
Horror showThe movie business has faced all sorts of upheaval in recent years, through the rise of streaming services such as Netflix and a general malaise about going to the cinema—indeed, research shows North American box office revenue for summer of 2017 fell by almost 16% YoY. And this appears to have taken its toll: While shares in Netflix have posted gains north of 40% this year, Regal's stock was in steady decline throughout the year and only started ticking upwards after rumours of a possible deal surfaced in late summer.
No wonder, then, that these issues have seen a number of consolidatory deals in the sector. Last year, for example, AMC acquired Odeon & UCI for £921 million, while more recent deals include Gaumont exiting its 34% stake in Les Cinémas Gaumount Pathé for €380 million to Pathé.
Will more deals be just the ticket?It is possible that, on the back of the Regal deal, more may emerge as the industry consolidates further.
While it is true that, per the PitchBook Platform, M&A in the movies, music and entertainment sector is down year-on-year, large-scale deals are still being done. The biggest takeover in the sector this year is AMC’s $929 million deal for Nordic Cinema Group in March.
One major deal is already in the pipeline, with AMC confirming plans to spin-off Odeon & UCI in an IPO next year. And with private capital invested in the sector rising above corporate M&A levels for the first time, we could be in for a blockbuster few years of movie dealmaking.
Related read: M&A Flashback: Comcast, GE announce NBCUniversal deal