The multiplex segment is witnessing blockbuster deal action. Theatre chain INOX Leisure has announced the acquisition of promoters' stake in rival multiplex chain Fame India. In a statement to the BSE, INOX said, it has acquired 43.28% stake in Fame, through bulk deals, for Rs 66.48 crore in cash. The deal would make INOX one of the largest theatre chain in the country with combined strength of 55 multiplexes and 204 screens.
The deal values Fame India at Rs 153.6 crore, a little higher than its prevailing market capitalisation of around Rs 150 crore. INOX added that it will now come out with an open offer for another 20% stake, for which it may end up shelling out another Rs 30 crore.
The per share acquisition price for INOX comes at Rs 43.7, which is just marginally short of yesterday's closing price. This is also likely to be the price at which the open offer will be made.
The deal comes in the backdrop of PVR-DT Cinemas merger, which is expected to be completed later this month after delays. Under the deal, PVR Ltd was acquiring 26 screens operated by the DLF subsidiary in a Rs 60-crore stock-cum-cash deal. This deal is expected to take PVR's capacity to 134 screens. The multiplex segment continues to be lead by Anil Ambani’s BIG Cinemas with over 240 screens in India. With intense competition among the theatre chains, specially in metros, the consolidation comes as a natural development.
This deal translates into valuation of Rs 1.6 crore per screen, much less thanwhat PVR is paying for DT Cinemas. To be fair, there are other factors which determine specific deals.The company also had a debt Rs 80 crore, which would have prevented INOX paying much of a premium for the acquisition.
Incidentally INOX, in which Reliance Capital owns as much as 9% stake, has been in the thick of rumours that Big Cinemas is eyeing to acquire it way back in 2007. However, there was no further development on that account. While Reliance Capital, the financial arm of Reliance ADAG which also owns Big Cinemas had at that time raised its holding from 7% to 9%, it didnt pursue the strategic acquisition.
Fame's subsidiaries include Shringar Films (film distribution business), Big Picture Hospitality Services (food business JV) and Headstrong Films (film production JV).
Gujarat Flourochemicals (GFL), the parent firm of INOX, has funded the entire transaction through a shareholder loan. This would be the second acquisition by INOX. In 2006, it acquired Calcutta Cinema Private Ltd which ran business under the “89 Cinemas” brand.
The share price of INOX shot up by nearly 20% after the announcement to reach Rs 92 in the morning before coming down to Rs 86 levels. The shares of Fame India were down by 2.4%, trading at Rs 42.9. For FY09, Fame India reported revenues of Rs 138 crore and while INOX had a turnover of Rs 225 crore for the same period.
Enam Securities was the investment banker and Khaitan & Co was the legal advisor to INOX. Fame India was advised by Yes Bank as the investment banker and Naik Naik & Co as legal advisor.