PVR expansion strategy: To acquire 71.69% stake in South India-based SPI Cinemas in Rs 633 cr all-cash deal

New Delhi: Multiplex chain PVR Ltd on Sunday said it is acquiring 71.69 percent stake in South India-based SPI Cinemas for about Rs 633 crore in an all-cash deal. It said that the company’s board has also approved the issuance of 1.6 million shares of PVR for the residual stake. PVR said in a regulatory filing that the board has approved the execution of a Share Purchase Agreement (SPA) in this regard. The acquisition involves buying of SPI’s 61.65 percent from SS Theatres LLP and 10.04 percent equity from S V Swaroop Reddy, it said. The proposed acquisition is in line with the PVR’s continual growth and expansion strategy, it said.

“Such inorganic growth will enable the company to expand its presence in South India and make a mark on the film exhibition industry there. The acquisition of 71.69 per cent stake in SPI will be for a cash consideration of about Rs 633 crore,” PVR said.

The boards of both the companies have approved the merger, it said adding, “1.6 million equity shares of PVR to be issued for residual 28.3 percent stake”. PVR’s chairman and managing director Ajay Bijli said: “The acquisition of SPI Cinemas is of significant strategic value for PVR and will further cement our market leadership position in India. He said the acquisition will make PVR the undisputed leader in the South Indian market and provide an attractive platform “for us to expand in that geography, which currently is highly underpenetrated in terms of multiplexes… This transaction is a significant step in helping us achieve our vision of having 1000 screens by 2020”. [caption id=“attachment_609013” align=“alignleft” width=“380”]  Ajay Bijli, Chairman cum Managing Director, PVR Cinema. FP photo[/caption] Post the transaction, PVR will have 706 screens operational across the country and the company said this acquisition will make it the number 1 operator in top 3 cities of South India – Chennai, Bangalore, and Hyderabad. As per the terms of the SPA, the acquisition will have to be completed within 30 days from execution of the agreement and the merger into the PVR Ltd within a period of 18 months from the date of completion of the acquisition. The Board has also approved “provisions for customary call/put options for acquisition of the remaining 28.31 percent stake in the SPI from SS Theatres LLP, if triggered, for a consideration not exceeding Rs 300 crore.” SPI, which has a presence states like Tamil Andhra Pradesh, Nadu, Telangana, Karnatak, and Kerala, has total assets of Rs 319.63 crore an turnover of Rs 308.60 crore as on  31 March 2018. SPI Cinemas operates 76 screens across 17 properties in 10 cities under several brands Sathyam, Escape, Palazzo, The Cinema, S2 Cinema. PVR said it will fund the transaction through a combination of internal accruals, debt issuance and deferred payment of a part of the consideration (Rs 100 crore) to be paid on achievement of certain milestones. In 2016, PVR had acquired 32 screens of DT cinemas from realty major DLF for Rs 433 crore. PVR operates over 600 screens in 51 cities in India. At present, PVR operates over 600 screens in 52 cities in India.