Ajay Bijli-ledPVR Ltd, which pioneered the multiplex business in India 15 years ago, is set to buy out the 141-screen multiplex chain Cinemax owned by the Kanakia Group, making
PVR the country’s largest mutiplex operator. The deal, expected to close next week, will be executed in two stages. PVR will buy out Cinemax’s promoters, Rashesh Kanakia and his family, who currently own a little over 69%, followed by an open offer for another 26%, said two people familiar with the developments. ICICI Prudential, with a 6.70% holding, and Mavi Investment Fund, with 1.20%, are significant institutional stakeholders as on September 30. The bulk of the promoter holding is pledged with financial institutions, but the Kanakias have been revoking the pledged shares to free them.
The final negotiations over pricing are still on, but PVR has offered Rs 170-180 per share to buy out the promoters. This is a premium of 6.25-12.5% to the current trading price of Cinemax, which closed on Thursday at Rs 160, up nearly 5% on both the BSE and NSE. The stock has run up 150% in the past one month on the back of the impending deal.The upswing has fuelled large deals in the counter recently, with Reliance Capital’s Media and Entertainment Fund buying around 1.6 lakh shares for more than Rs 1 crore. Leena Investments Consultancy LLP picked up 1.65 lakh shares at an average price of Rs 122.51 per share, for a total of Rs 2 crore, according to recent market data.
PVR will have to shell out around Rs 500 crore to buy out the Cinemax promoters and is busy giving finishing touches to the financing for the transaction, said one of the persons mentioned above. In FY12, the company registered a profit of Rs 28 crore on revenues of Rs 470.9 crore. The PVR stock ended the day in the green, up 1.83% at Rs 250. The Cinemax brass has been preparing the ground for the sale, said another official aware of the development. Around noon on Thursday, the senior management was called in by Hemanshu Kanakia, Rashesh Kanakia’s younger brother, to inform them of a possible change in guard.
He, however, assured them there won’t be any large-scale retrenchment. Messages and repeated calls to Ajay Bijli, the chairman & managing director of PVR Ltd , and Rashesh Kanakia, executive chairman of Cinemax India went unanswered. On Thursday, Cinemax issued a statement to the exchanges after market hours confirming “that the promoters have informed the company that they are evaluating options for the sale of their shares in the company. However, no definitive agreements have been finalised in this regard”.