-By Nyay Bhushan

NEW DELHI – Leading cinema chain PVR Ltd. has announced that it bought the 69.27 percent promoter stake in competing multiplex operator Cinemax India for rupees 3.95 billion ($745 million). New Delhi-headquartered PVR – which opened India's first multiplex in 1997 as part of its earlier joint venture with Australia's Village Roadshow – runs 46 properties with 213 screens offering a seating capacity of 50,655 seats. Mumbai-based Cinemax – which has a stronger presence in western India - runs 39 operational properties with 138 screens offering 33,535 seats.

Following the acquisition, PVR becomes India's largest movie exhibition chain with a combined strength of 351 screens at 85 locations offering 84,190 seats.

PVR's closest rival will now be the recently merged Fame-Inox entity which runs 257 screens followed by the Reliance MediaWorks-owned Big Cinemas which runs 253 screens.

The only international cinema chain in India, Mexico's Cinepolis, launched its operations here in 2009 and currently runs 34 screens. Recent unconfirmed media reports have indicated that Cinepolis is in talks to acquire Big Cinemas.

“In order to achieve market leadership in the Indian exhibition business, PVR has been on a rapid expansion mode both through organic as well as inorganic routes,” said PVR chairman Ajay Bijli. “We are excited about the synergy potential and cost benefits that accrue from the larger scale of operations of the combined network. Cinemax has a premium portfolio of multiplex screen across India and has been a market leader in western India. We heartily welcome the Cinemax team and look forward to working with them in extracting full benefits of integration and consolidation.”

“We believe that the exhibition business benefits from consolidation as large scale strengthens competitive advantage as well as significantly enhances operational efficiencies. This transaction enables realization of such benefits and would create significant value for all the shareholders of Cinemax. The deal will enable us to ensure greater focus on our real estate and hospitality businesses,” said Cinemax promoter Rasesh Kanakia.

The PVR acquisition values Cinemax at rupees 5.7 billion. In the last financial year 2011-12, Cinemax posted a profit of rupees 77.9 million on revenues of rupees 2.7 billion while PVR's net profit stood at rupees 281.1 million on revenues of rupees 4.7 billion.

In August, L Capital Eco Ltd, a subsidiary of the $ 640-million global private equity (PE) firm L Capital Asia, announced it would invest about $19 million (rupees 1.08 billion) in exchange for a 10 percent stake in PVR Ltd. L Capital Asia is backed by Louis Vuitton Moët Hennessy (LVMH) - the world’s biggest luxury goods group - and Group Arnault.

PVR is making the Cinemax acquisition through its wholly-owned subsidiary Cine Hospitality Private Ltd. The acquisition will be followed by an open offer to the public shareholders of Cinemax India for an additional 26 percent stake for cash, as per Securities and Exchange Board of India (SEBI) takeover regulations. This would eventually lead to the delisting of Cinemax shares.

PVR has also got the board approval to raise rupees 2.6 billion via a preferential issue of equity shares. This would see rupees 10.62 million fully paid equity shares issued to PVR promoters Ajay Bijli and his brother Sanjeev Kumar, along with L Capital and private equity fund Multiples Private Equity Fund. This entails the Bijli's investing about rupees 250 million, L Capital about rupees 824 million and Multiplex about rupees 1.53 billion in PVR. As a result, both Multiples Private Equity and L Capital will each own about 15.8 per cent stake each in PVR with the promoters holding a 32 percent stake.

“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 across different stages in the life-cycle of a company. I am personally elated to be part of PVR's game-changing journey yet again,” said Multiples Alternate Asset Management founder Renuka Ramnath.
-The Hollywood Reporter