PVR - Cinemax acquisition to enhance clout - Edelweiss

PVR has announced buyout of Cinemax India's promoters' entire 69.27% stake for INR3.95bn, valuing latter at INR203.65 per share (~10% premium to today's closing price). PVR's board has also approved purchase of up to 26% stake of Cinemax from minority shareholders pursuant to an open offer. To fund this, PVR board has approved raising of INR2.6bn via preferential issue of ~10.6mn shares of PVR at INR245 per share. Post this deal, PVR will be the largest multiplex operator in India with 351 screens, well ahead of peers. Also, ability to execute the deal without putting a significant strain on the debt level is a laudable positive.

Key negative from this deal is a ~36.7% dilution of minority shareholders. Also, we need to monitor how PVR manages the two brands—PVR and Cinemax—and possible concentration of screens in some geographies.

We will revise our numbers once we have more details, but remain positive as we expect PVR's bargaining clout to increase and operating synergies to kick in. Maintain 'BUY'.

Source : Equity Bulls

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