Regal Cinemas, headquartered in Knoxville, Tenn., has set the wheels in motion to acquire the 643-screen Cobb Theatres of Birmingham, Ala., it was announced Wednesday.
The deal, expected to close within 60 days, will merge the two companies, with Regal anteing up approximately $200 million — composed of about $100 million to be paid Cobb in Regal common stock and an additional $100 million in outstanding debt to be assumed by the Knoxville movie chain.
“I believe this may be the largest acquisition by a theater exhibitor in history,” said Regal director of marketing Phil Zacheretti. “It’s an almost perfect fit. I think there are no more than a couple of instances where we have theater overlap in the same markets.”
The 8-year-old Regal operates 1,433 screens in 18 states, with 900 additional screens expected to open by 2000. The Cobb circuit buy will boost Regal into third place among domestic exhibitors.
Rumors of a major acquisition by Regal have been circulating in the industry for the past six months. The chain reportedly was kicking the tires of such regional operators as Act III and SoCal Cinemas.
The Cobb deal picked up heat in the past week, although senior execs in Birmingham were denying it as recently as Monday.
Response to the merger/acquisition was generally upbeat, though one industry analyst cautioned about the perils of rapid growth. He pointed to the United Artists circuit experience a decade ago, when it went on a buying spree that led to a severe financial crunch and subsequent off-loading of many sites.
Regal stock closed at $32.87 Wednesday, down 50¢. Company stock had been trading as high as $34.75 this year, rebounding from a weak first quarter.