Management at Cineworld (CINE) has confirmed that it is in advanced talks with US-based Regal Entertainment Group about a possible reverse takeover. The deal being discussed would see Cineworld acquire all of Regal’s share capital at $23 (£17) per share, or around $3.6bn. Funding would come from a combination of debt and the sale of new shares through a “material” rights issue.
The announcement came as a surprise to both analysts and shareholders. They’d previously been expecting the possible acquisition of a European cinema chain or perhaps a special dividend. Based on projections for 2018, Cineworld was already expected to end the year with net debt equivalent to 3.2 times cash profits. Analysts at Stifel estimate that this could increase to around four times, assuming the cinema group effectively doubles its equity base by raising around £1.6bn from new shares and funds the balance though £1.1bn of additional debt. The Greidinger brothers, who own Global City Holdings, which has a 28 per cent stake in Cineworld, have already committed to fully subscribe to the rights issue.
