Mumbai-based Kanakia brothers have exited the movie exhibition business, sealing a deal with Ajai Bijli's PVR Limited
to sell the 69.27 per cent promoter stake in Cinemax India Limited
After inking the deal with the Kanakia family, Ajay Bijli said
: "With the proposed acquisition of Cinemax, we hope to create the largest movie exhibition chain in India."
PVR's subsidiary, Cine Hospitality Private Limited (CHPL), will pick up the Kanakias' stake in Cinemax for Rs 395 crore, at Rs 203.65 per share.
Himanshu Kanakia and Rasesh Kanakia individually hold 33.46 per cent each in Cinemax India. The rest is held by family members. About 70 per cent of these shares have been pledged.
PVR owns 46 operational properties, with 213 screens, and a seating capacity of 50,655 seats. Cinemax has 39 operational properties, with 138 screens, and a seating capacity of 33,535 seats. FROM THE MAGAZINE:PVR's de-risking strategy gets a big boost
Together, the two entities will create the largest movie exhibition chain in India, with 351 screens, 85 locations, and 84,190 seats. Cinemax has a premium portfolio of multiplex screen across India and, has been a market leader in western India.
The acquisition will give PVR a leadership position in 10 key markets across the country, according to a statement by the company.
As of September 30, Ajai Bijli individually held a 5.44 per cent stake
in PVR Limited, while Bijli Investments and Priya Exhibitors held 18.73 per cent and 16.05 per cent, respectively, making up a promoter stake of 40.22 per cent. Of this, 4.31 per cent (Priya Exhibitors) is under pledge.
Since PVR is buying a stake in excess of 25 per cent in Cinemax, it is following up the deal with an open offer, in keeping with Sebi regulations.
It is offering to buy an additional 26 per cent stake from Cinemax shareholders at Rs 203.65 per share (26 per cent stake translates to 7,280,000 shares of Cinemax). While Cinemax shares have a face value of Rs 5, PVR shares have a face value of Rs 10.FROM THE MAGAZINE:Ajay Bijli's PVR in expansion mode
PVR is also issuing 10,625,205 preferential equity shares to promoters, existing investor L Capital, and new PE investor Multiples Alternate Asset Management, for Rs 260 crore, at Rs 245 per share.The Bijli family will invest Rs 25 crore
, L Capital about Rs 82.3 crore and Multiples about Rs 153 crore for the preferential shares. This money will go into PVR's kitty, boosting its financial position.
In the expanded equity base, consequent to the preferential allotment of shares, Multiples and L Capital will own 15.8 per cent each, while the promoters will hold 32 per cent.
Renuka Ramnath, founder of private equity firm, Multiples, said she was delighted to partner with PVR.
"Given my long-standing relationship with Ajay Bijli and PVR, and our deep understanding of the space, Multiples was able to move quickly and support the company. This is a perfect example of how private equity partnerships can transcend different stages in the life cycle of a company."
Now that they have quit the movie exhibition business, the Kanakia brothers will focus on the group's core real estate business, Cinemax Properties Limited.
"The deal will enable us to ensure greater focus on our real estate and hospitality businesses," said Rasesh Kanakia.
On Thursday, PVR shares gained 6 per cent to close at Rs 252.15, while Cinemax India shares shot up 5 per cent to close at Rs 184.40 on the National Stock Exchange.
In the July-September quarter, PVR reported a net profit of Rs 14.96 crore while Cinemax reported Rs 13.39 crore, according to the data available on the Bombay Stock Exchange.
PVR's proposed open offer would follow the UK spirits giant Diageo Plc
making a buyback offer to United Spirits shareholders
for an additional 26 per cent stake, and Britain's biggest drugmaker GlaxoSmithKline Plc's
offer to the shareholders of its Indian subsidiary GSK Consumer Healthcare
, for an additional 31.8 per cent.