PVR and INOX announce a blockbuster merger, to become a combined entity that will be headed by Ajay Bijli (owner and chairman of PVR).
PVR and INOX announce a blockbuster merger to tackle the threat of growing OTT Content. With the OTT onslaught of the theatre business, the aims of theatre owners have risen to an extent that they want to dominate the multiplex market, as the combined entity is assured to have a market share of 50% with a box office share of 42% for Hindi and English content.
But with a higher ambition comes higher scrutiny! This deal will be subject to regulatory and shareholder approval.
From a shareholder’s point of view –
Imp – In this stock deal, for every 10 shares of INOX, the shareholders will receive 3 shares of PVR. Not a bad deal!
Governance Structure –
The structure looks clean, governance wise, as Pavan Kumar Jain (chairman of INOX) will take the seat of a non-executive director with INOX promoters having a 16.66% stake in the combined entity, and Sanjeev Kumar (Joint MD at PVR) being the executive director with PVR promoters having 10.62%.
From a regulatory standpoint –
The combined entity is poised to become the largest film exhibition company in India. CCI is the first one to eye over such a merger, where the entity is set to make multiplex a two-player market.
Cinepolis, the third-largest multiplex chain in India, will become less than one-third of the merged company.
But, here’s a catch! This merger won’t require CCI’s #approval as it is below the threshold of Rs 1,000 cr. This number could have been much higher if there was no pandemic. But the point is maybe we would have never seen a merger if the situation would have been normal.
The market sentiment –
The shareholders have no reason to be upset as this synergy will ramp up the EBIDTA by Rs 150 cr (Rs 90 cr from ads & Rs 60 cr from convenience fee).
The multiplex business derives revenues from two main sources:
~Ad Revenue (INOX’s is at a 33% discount than PVR, per screen wise).
~Convenience Fee (INOX’s is 50% lower than PVR).
This deal can be weighed as if it’s a merger of Amazon Prime with Netflix! Hence, it will be very interesting to see if the regulators take into consideration the present case of bad revenues or keep in mind the real dominance of these top two players.
Hence, it will be very interesting to see if the regulators take into consideration the present case of bad revenues or keep in mind the real dominance of these top two players.