PVR calls off DT Cinemas deal

Inox-Fame deal opposed by Reliance

NEW DELHI -- It seems the recent phase of consolidation among rivals in India's theatrical landscape indicates that there is indeed many a slip between the lip and the cup.

Leading theatrical chain PVR Cinemas has called off its deal to acquire rival DT Cinemas, informing the Bombay Stock Exchange that “the conditions precedent for the acquisition have still not been satisfied.”

In November, PVR announced it would acquire DT Cinemas in a cash and stock deal worth 622 million rupees ($13.5 million), paying 200.2 million rupees and issuing 2.56 million shares to DTC parent real estate giant DLF Group, reflecting a 10% stake.

But the deal was subject to conditions being met within 60 days, which also saw both parties extending the deadline to February 15.

Exact details as to why the conditions were not met by the revised deadline were not given by either company, leading PVR to inform the stock exchange that “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.”

PVR runs 108 screens and the DTC acquisition would have added another 26 screens.

Earlier this month, another acquisition between rivals saw Inox Leisure acquiring Fame India Ltd., leading the joint entity to become India's second largest theatrical chain with a combined total of 204 screens. Market leader Big Cinemas (owned by DreamWorks partner Reliance Big Entertainment) runs 213 screens with PVR coming in third.

The termination of the PVR-DTC deal comes in the wake of recent developments where Reliance MediaWorks has voiced its objections to the Inox-Fame deal. Inox acquired a 43% stake in rival Fame India Ltd. for 664.8 million rupees by buying 15.1 million shares. Inox is also to make a subsequent open offer for an additional 20%, pending regulatory approval, which is estimated to cost about 300 million rupees.

RBE-owned Reliance MediaWorks, which runs the group's theatrical business, was also in the running to acquire Fame with a reportedly much higher offering price than what was offered by Inox.

But in a statement last week, RMW said that “the issues involved are nowhere as simple as acceptance of a higher or lower price by the sellers, but far more complex and involving serious matters relating to, inter alia, suppression of material facts; violations of the Securities and Exchange Board of India Takeover Code, and SEBI Fraudulent & Unfair Trade Practices Regulations; the fiduciary duties of promoters of listed companies, and protection of the interests of minority shareholders.”

RMW parent Reliance Anil Dhirubhai Ambani Group's financial arm Reliance Capital Partners owns a 6.2% stake in Fame, which it increased to 8.1% by purchasing 570,000 shares in Fame India at a share price of 59.09 rupees, just after the Inox deal was announced.

While Inox and Fame did not comment on the issue, RMW's statement added that it “will bring all relevant facts to the notice of all regulatory authorities, including inter alia SEBI, Ministry of Company Affairs, Reserve Bank of India, Income Tax, etc. for such action, if any, as they deem appropriate.
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