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Regal Entertainment Group in Merger Talks With Cineworld

UPDATED — British movie chain Cineworld Group is in talks with U.S. peer Regal Entertainment Group about a potential merger.

Regal confirmed after the market closed  that it was in talks for an all-cash acquisition at a price of $23 per share — a 17% premium over its closing share price of $19.63. The offer would be worth about about  $3.1 billion.

“No agreement has been reached, and there is no assurance that any transaction will result,” the company said. “Regal Entertainment Group does not intend to make any further comment, or respond to any inquiries, until an agreement, if any, is reached, or discussions have been terminated.”

Reuters, citing unnamed sources, first reported the talks. Regal is valued at $2.83 billion, based on trading Tuesday. Shares jumped $1.38 to $19.63 in heavy trading following the report before being halted on the New York Stock Exchange.

Regal, the second biggest cinema chain in the U.S. with over 7,300 screens, attempted to sell itself in 2014 and hired Morgan Stanley to evaluate options, then announced in early 2015 it wouldn’t try to find a buyer.

Regal announced on Oct. 25  that it will test demand-based pricing for film tickets in several markets early next year through its partnership with mobile ticketing app maker Atom Tickets. It also reported on the same day third-quarter earnings and revenues that topped Wall Street estimates while attendance fell 14% to 44.69 million customers. Revenue dropped 12% to $716 million, which the company blamed on the unimpressive slate of movies.

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“In a challenging third-quarter box office environment, we were pleased that our ongoing focus on customer amenities had a positive impact on our market share and operating metrics,” CEO Amy Miles said at the time.

Regal is based in Knoxville, Tenn. Billionaire Philip Anschutz has a controlling stake with about 10% of the shares. Its major brands are Regal Cinemas, Edwards Theatres, and United Artists Theatres. London-based Cineworld is the second largest cinema operator in Europe with more than 2,000 screens at 221 sites in nine countries. Cineworld’s largest shareholder is Global City Holdings BV.

A combined Regal-Cineworld would be able to compete more effectively with AMC Entertainment, which is controlled by China’s Dalian Wanda Group, along with digital distributors such as Netflix and Apple.

AMC is the largest chain in the world with 2,200 screens in 244 theatres in Europe and over 8,200 screens in 661 theatres in the United States. AMC bought the Carmike chain last year for $1.1 billion in the last major deal in the exhibition sector. AMC also acquired Europe’s Odeon chain for $1.2 billion last year.

 

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