The U.K.’s Cineworld Group Plc agreed to buy U.S. theater operator Regal Entertainment Group for about $3.6 billion to expand into the biggest movie market.
The $23-a-share deal comes a week after the companies confirmed news reports of takeover discussions, jolting cinema-operator stocks. The price represents a 26 percent premium to Regal’s close on Nov. 27, the day before discussions became public.
Cineworld will gain opportunities for growth outside Britain, where consumer spending is falling ahead of the country’s exit from the European Union. Movie-theater operators are consolidating to wring out costs and afford reclining chairs and expanded food-and-drink options to entice customers away from their Netflix binges at home.
“The joint group is going to create the best place to watch a movie,” Cineworld Chief Executive Officer Mooky Greidinger said in an interview Tuesday. Cinemas remain the “key drivers” of the industry, not home entertainment, he said. “The place to premier the big movies is in the cinemas.”
Shares of Cineworld fell 2.7 percent to 531.50 pence at 12:32 p.m. in London, bringing their decline this year to about 6 percent. The stock is down 19 percent since news of the talks emerged.
The company is expanding in the U.S. as the country’s theater chains are struggling with stagnating movie attendance. Many films this year have failed to meet expectations at the box office, and the summer season — usually the most lucrative for the industry — was the worst since 2006.
“The fact that if, in a certain year, there is a drop of 2 or 3 percent, it’s not the end of the world,” Greidinger said. Bigger movies still draw larger audiences and those who watch Netflix and Amazon at home are still likely to go to the theaters, he said.
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SOURCE: Bloomberg, Ville Heiskanen and Joe Easton