PVR Cinemas has decided to terminate its agreement
to acquire real estate developer DLF's exhibition
hall business, DT Cinemas. PVR informed the stock
exchanges today that, 'the conditions precedent for
the acquisition have still not been satisfied'.
The two companies had sought an extension till February
15 to conclude the deal. "The parties to the acquisition
agreement have mutually agreed not to further extend the
period for completion of the conditions precedent under
the acquisition agreement," said PVR to the Bombay Stock
Exchange . Initially, the PVR shares were to be allotted in January.
Nitin Sood, CFO, PVR, said: "We will continue to look at
inorganic growth in the domestic multiplex space. DT Cinemas
was one such option which we were exploring and, unfortunately,
it didn't work out. On the organic front, we intend to open 70 to 80
screens by 2011."
According to industry sources, DLF does not want to sell its theatre
business. "DLF has mall properties coming up and they believe they
can manage the cinema exhibition business on their own .
As a result, they changed their mind," said sources.
In November 2009, PVR had announced a cash-and-stock deal to
buy out DT Cinemas. Under the deal, PVR would issue 2.5 million
shares to DT Cinemas, representing 10 per cent of PVR's fully
diluted paid-up capital. Its market capitalisation at that time
was around Rs 322 crore. In addition, PVR would also pay Rs 20.2 crore
for the acquisition, putting the total deal value at roughly Rs 50 crore.
DT Cinemas has a portfolio of 29 screens located in Delhi
, Gurgaon and Chandigarh. All the acquired cinemas
are on long-term lease in various mall developments owned and
operated by the DLF Group. This acquisition would have
strengthened PVR's presence in the National Capital Region.
PVR currently operates 108 screens and the DT deal would have
raised this to 137. Further, under the alliance,
PVR would have had exclusive rights to operate as a key
anchor multiplex partner in all future mall developments
by the DLF Group. DLF had a slew of future mall developments
planned in key markets in Delhi, Mumbai Chennai,
Hyderabad, Noida, Jalandhar and Lucknow
At the time of the announcement, industry experts had raised
questions on whether PVR's revenues wouldn't be cannibalised, since
PVR screens are located close to DT screens in many areas.
Even without DT Cinemas coming into its kitty, PVR controls 60-70 per
cent of screens in the Gurgaon-Delhi region. The oldest multiplex player,
it was ousted from its second position by the INOX-Fame India deal.
INOX's acquisition of Fame has increased its screen count to 204
screens, almost double of what PVR operates at the moment.
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