International Joint Ventures and Merger & Acquisitions


August 22, 2018

On 12th August, India’s largest movie exhibitor, PVR Cinemas Ltd, brought to an end years of speculations when it announced that PVR is acquiring

On 12th August, India’s largest movie exhibitor, PVR Cinemas Ltd, brought to an end years of speculations when it announced that PVR is acquiring Chennai based multiplex chain SPI Cinemas Private Ltd., in a cash-cum-stock deal valued over 880 crore. In 2012 and 2016, PVR has acquired Cinemax and DT Cinemas respectively.

SPI Cinemas is the leading cinema exhibitor in South India which revolutionized the movie-watching experience for its clientele by consistently bringing in world-class technology and innovative offerings. It has an annual footfall of 16-17 million and logs in annual revenues of Rs 410-420 crore. After PVR’s announcement, Kiran Reddy, CEO of SPI Cinemas confirmed the news by announcing, “We are excited to now partner with the largest Indian multiplex chain PVR, as this combines two proven business models and will create significant value for moviegoers as well as all the stakeholders”.

In the past few years, SPI Cinemas has majorly redefined the theatre-going experience in Chennai. It revamped and rebranded the iconic Sathyam Cinema (which, was founded in 1974) and introduced multiple brands under its chain, namely S2, Escape, Palazzo and The Cinema to cater to different categories. SPI Cinemas has a total of 76 screens across 17 properties in 10 cities, of which 68 are operational and eight are scheduled to start operations soon. Further, SPI expects to roll out 100 more screens over the next five years.

After the acquisition, the founders of SPI Cinemas, Kiran M Reddy and Swaroop Reddy, will remain associated with the business and help PVR to have a better understanding of the existing markets of SPI Cinemas in Tamil Nadu, Telangana, Andhra Pradesh, Karnataka, Kerala and Mumbai.
PVR’s earlier bid to takeover SPI in 2015 failed due to some valuation issues. Now, EY India was appointed as the exclusive financial advisor on the transaction. It observed the humongous potential in the south India Entertainment Industry, with movies in three languages- Tamil Telugu and Kannada. The south India entertainment industry alone, accounts for 37% of the Indian box office collection.
As per the terms of the proposed acquisition, PVR would acquire 222,711 equity shares of SPI Cinemas constituting 71.7% of the paid up equity share capital of SPI from existing shareholders for a total consideration of Rs 633 crores and issue 1.6 million equity shares of PVR Limited constituting 3.3% of the diluted paid up equity share capital of the company valued at around 212 crores, as agreed in the scheme of mélange between SPI and PVR.

The transaction of the deal is expected to get closed within a month while the merger process is supposed to be concluded in next 12 months. This merger will help PVR to establish deep roots in south India with a total screen count of 235. Post this merger, PVR’s total screen count would increase to 706 across 152 properties in 60 cities all over the India. Ajay Bijli, PVR Cinemas Chairperson and Managing Director 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.”

The acquisition of SPI Cinemas is of momentous and calculated value for PVR as it will not only cement PVR’s market leadership position in India but will position PVR as the seventh largest cinema exhibitor in the world in terms of annual admissions at theatres, which will exceed 100 million per annum. This business deal is a giant leap taken by PVR Cinemas to achieve their vision of having 1000 screens by 2020.

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