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Box Office Deal: Cineworld in talks to acquire Regal Entertainment for around US$3.6bn in cash

Last updated: 15:20 29 Nov 2017 GMT, First published: 07:44 29 Nov 2017 GMT

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The group said it is currently intending to fund the potential acquisition through a mixture of incremental debt and a rights issue

Cineworld Group plc (LON:CINE) is looking at a major expansion in the US with the announcement that it is in talks to acquire Regal Entertainment Group (NYSE:RGC) for approximately US$3.6bn in cash, possibly funded by a rights issue which dragged its shares lower.

In late afnoon trading, Cineworld shares were down 18%, or 125.5p at 569p, while in earlyt New York trading Regal Entertainment shares were up 5% to US$20.64.

In a statement noting recent press speculation, the FTSE 250 listed firm said it is in advanced discussions with Regal - the second largest cinema chain in the United States -  and is finalising due diligence in relation to a possible all-cash offer at a price of US$23.00 per share.

READ: Cineworld under the cosh as it reports slowdown in box office sales

The group said it is currently intended that it would fund a potential acquisition of Regal through a mixture of incremental debt and a material equity raise by way of a rights issue, including a commitment to full subscription from Cineworld's 28% shareholder, Global City Holdings NV.

Cineworld added that the proposed financing of the potential transaction “will allow the enlarged group to continue its current strategy of investment in the business, as well as to maintain its policy of progressive dividends.”

The firm said it would only proceed with the potential transaction “in circumstances and on terms which it believes would be accretive to shareholder value.”

More scale to fight increasing digital competition

A deal between the two cinema chains would put the combined company in a better position to take market share from US industry leader AMC Entertainment Holdings Inc, and also give it more scale to fight increasing competition from Netflix Inc, Apple Inc and other digital outlets.

Regal –which owns 561 theatres with 7,315 screens – saw its shares jump as much as 16% yesterday after Reuters reported the deal talk, and closed up 7.6% at US$19.63, giving the US company a market value of about $3bn.

Cineworld has a market value of £1.9bn (US$2.5bn) based on last night’s closing price of 694.5p.

 -- Updates share price --

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