Indian cinema is watching a gripping blockbuster merger. PVR and Inox Leisure’s $2.3 billion union will combine the top multiplex operators as a battle for content and eyeballs across the country intensifies.
It’s not too pricey and just as Indian film-lovers lap up military releases like “Uri: The Surgical Strike” and “Sheershaah”, shareholders can enjoy this defensive deal.
The new company will boast 1,546 screens across 109 cities, representing less than one-fifth of the national screen total but a much larger share of the lucrative premium cinema segment. The companies are scaling up as theatre sales are rebounding to pre-pandemic levels. .
On the other hand, the industry has endured two years of lockdowns and urgent capital calls, and Indians are increasingly taking advantage of cheap data to watch films on smartphones and home televisions. That could be enough to persuade India’s relaxed regulator to ignore any competition concerns
Defensive deal
The transaction will make it easier to compete. PVR will issue new shares at a decent 16 per cent premium to Inox’s undisturbed price on Friday. The implied enterprise value amounts to roughly 100 million rupees for each of Inox’s 675 screens, per Breakingviews calculations.
That is less than PVR splurged on acquisitions in 2016 and 2018, and more than twice what it paid for Cinemax in 2012, per Anand Rathi analyst Shobit Singha
Yet shares of both buyer and seller jumped on Monday by as much as 6 per cent and 15 per cent respectively, underscoring hopes that increased scale will help the pair negotiate with moviemakers.
That’s important as studios are starting to push popular films like “Gehraiyaan”, loaded with Bollywood stars, directly to streaming platforms like Amazon Prime.
In the fight for content, India’s iconic entertainment brands and media moguls are joining forces. Zee Entertainment and a unit of Sony Pictures are completing a $7 billion merger to create a broadcast and streaming media powerhouse.
They’ll be in a stronger position to take on Mukesh Ambani’s Reliance Industries whose Viacom18 broadcast venture is tying up with media veterans James Murdoch and Uday Shankar.
Both Zee and Reliance are up against Walt Disney whose 2019 merger with 21st Century Fox landed it Star India. Against that backdrop, India’s top cinema halls have little option but to put on a big performance.