The Cineworld Group based in the UK agreed to acquire Regal Entertainment Group a theater operator based in the United States for $3.6 billion to move into the world’s largest movie market.
The deal for $23 per share comes one week after the two companies confirmed reports they were holding takeover talks that jolted stocks of cinema operators.
The price is a premium of 26% to the closing price of Regal on November 27, the day prior to their talks becoming public.
Cineworld will receive opportunities for expansion outside Britain a market where spending by consumers is dropping leading up to the exit by the country from the European Union.
Operators of movie theaters are going through a period of consolidation to cut costs and to afford the new reclining chairs, expanded options for food and drink to attract customers away from staying at home and watching Netflix.
CEO of Cineworld Mooky Greidinger said that the new group would make the best place to watch movies. The CEO added that cinemas are the important drivers of this industry, not entertainment at home, as the place to premier is on the big screen.
Shares of Cineworld were down 3.7% in London trading on Tuesday morning, bringing the drop in shares in 2017 to 7%. The stock has fallen 19% since news emerged about the talks.
The company is growing by expanding into the United States as the country’s chains of theaters struggle with sluggish attendance at movies. Many films in 2017 have not met expectations when it comes to the box office, and during the summer season, which usually is the industry’s most lucrative, it was the worst in 11 years.
Cineworld has refurbished its movie theaters across the UK, the rest of Europe and Israel so they can offer facilities for moviegoers that are top class, said the CEO.
The changes include wider seats, better sound systems, larger screens and more variety of food selection.
The deal gives the two companies a pretax savings as well as structural synergies of $150 million annually.
Changes it is considering include making the Regal ticketing systems and movie theaters more modern.
The Philip Anschutz’s Anschutz Corp agreed to provide its consent to support this deal, the only shareholder action by Regal that is required to approve the transaction.
Cineworld will fund this deal with both debt and equity it sells through a rights issue for £1.7 billion or $2.3 billion.