Multiplex giants PVR, INOX announce merger of operations

The two multiplex entities, PVR and Inox Leisure, surprised the business world with a stunning announcement on Sunday. The two companies announced a merger between their two businesses. This merger has helped the companies become India’s largest multiplex chain with total control over the 1546 screens in 109 cities. Inox Leisure will merge with Priya Village Roadshow (PVR) together, and it will be called PVR Inox ltd.

Why did the two rivals decide to merge?

Ever since the pandemic began, the multiplex business was in chaos as more strict restrictions were being put in, and a lesser number of the audience were allowed to watch the movie, including the looming threat of a new variant causing this business take further hits. According to the Economic Times, the director of Inox Leisure was asked, ‘Who proposed this merger’? Emphasizing his relationship with the current Chief Managing Director(CMD) of PVR, Ajay Billi, he said, “We have known Ajay very well for over a decade and we have had the highest degree of respect for what he has created as a pioneer of the industry and what better than for two of the best brands to come together to share a common passion of serving the consumer, the finest movie watching experience, not only in India but potentially in the world as well. That was the driving force behind it.”

What value does the deal hold for the current stakeholders?

The shareholders of Inox will be rewarded with PVR shares in a pre-approved share swap ratio; it will be 3:10, which means that Investors will get three shares of PVR for every 10 shares of Inox Leisure. After, the promoters of PVR will hold 10.62% of the stake, while Inox promoters will have 16.66% in the new combined entity.

The new company will also have a new board which would consist of 10 members with equal representation on the board for both companies. The present figures tell us that there are currently 9500 screens in the country, out of which Inox operates 675 across 72 cities. In comparison, PVR operates in 73 cities and has 871 screens, followed by Cinepolis, which has 400+ screens and remains the third-largest multiplex giant before the deal. There were rumours of the ongoing talks between PVR and Cinepolis for a merger. However, these rumours finally ended after the Sunday announcement. Both entities will have a market share of almost 40% in the multiplex market after the unification.

Has the deal been approved by the Competition Commission of India (CCI)?

Until now, the deal does not require the approval of the CCI. As per the rules, “acquisitions where enterprises whose control, shares, voting rights or assets are being acquired (i.e. the target enterprise), have assets of not more than Rs. 350 crore in India or a turnover of not more than Rs. 1000 crore in India is exempt from Section 5 of the Act for a period of 5 years.” Accordingly, a notice for such acquisitions need not be filed with CCI.