M & A CritiqueIn a bid to expand its footprint across the country, multiplex chain INOX Leisure Ltd (INOX) had proposed to acquire Satyam Cineplexes Ltd in July 2014 for Rs 182 crore. Satyam has nine multiplexes, including three in Delhi and one each in Amritsar, Indore, Jodhpur, Mysore, Rohtak and Aurangabad with total 38 screens.
However, the boards of INOX Leisure and Satyam Cineplexes have extended the deadline for completion of their merger until the end of December 2016 due to pending court approval. “The Board of Directors of INOX Leisure Limited and Satyam Cineplexes Limited have passed a Resolution for amending the Clause 18 of the Scheme of Amalgamation in order to extend the date of validity of the Scheme from December 31, 2015, to December 31, 2016,” INOX said in a regulatory filing. The development comes after the Delhi High Court reserved its order on the matter after a hearing.
INOX said earlier, the Clause 18 of the Scheme of Amalgamation provided that in the event of scheme not being sanctioned by the High Court, and/or the order or orders not being passed on or before December 31, 2015, or within such further period or periods as may be agreed upon between Satyam and INOX through their respective Board of Directors, the scheme shall become null and void.
Each party shall bear and pay its respective costs, charges and expenses for and/or in connection with the scheme. “There are no other material changes in the scheme,” INOX said in its filing.
INOX Leisure and Satyam Cineplexes have extended the deadline for completion of their merger till the end of December 2016 due to pending court approval
The Deal
Multiplex chain INOX Leisure Ltd (INOX) had proposed to buy 100% share equity capital in New Delhi-headquartered Satyam Cineplexes Ltd. With the proposed acquisition, INOX’s screen count in India would have had risen to 358, across 91 multiplexes and 50 cities.
About INOX:
INOX Leisure Limited is the diversification venture of the INOX Group into entertainment. INOX Leisure’s mission is to be the leader in the cinema exhibition industry, in every aspect right from the quality and choice of cinema to the varied services offered and eventually the highest market share. INOX has traversed its own path by bringing in a professional and service-oriented approach to the cinema exhibition sector. With strong financial backing, impeccable track record and strong corporate ethos, INOX has established a strong presence in the cinema exhibition industry in a very short span. It must be noted that INOX was chosen post a nationwide tender to design, construct and operate the prestigious multiplex in Goa. Since the launch of the multiplex in 2004, INOX is the venue of the prestigious International Film Festival of India (IFFI) every year.
Since its inception in 1999, INOX has been active in exploring acquisition and/or expansion opportunities on the continuous basis with a view to consolidate its position in the multiplex industry. INOX currently operates 82 multiplexes and 320 screens in 45 cities making it a truly pan-Indian multiplex chain. INOX Leisure Ltd. will continue its expansion into places like Jammu, Mangalore amongst others. All INOX cinemas have state of the art facilities in terms of modern projection and acoustic systems, interiors of international standards, stadium styled high back seating with cup holder arm-rests, high levels of hygiene, varied theatre food, a selection of Hindi, English and regional movies, computerized ticketing and most importantly high service standards upheld by a young and vibrant team.
About Satyam Cineplexes:
Three decades in the world of cinema exhibition, pioneering and contributing towards the evolution of Indian Cinema into a 3 billion USD industry is how each employee working at Satyam Cineplexes Ltd. relates to the company. Subhash Chachra the Chairman of the group has had a formidable journey in evolving India’s well known ‘Satyam Cineplexes’ brand.
Deven Chachra, Managing Director of the group joined hands after studying from the Wharton Business School specializing in the detailed study of the most successful multiplex market which is the US including their technology and development trends. Deven pioneered the first multiplex cinema of Satyam Cineplexes Ltd in 2002 at Patel Nagar and since have led a successful passage to the expansion of the Satyam Cineplexes Ltd Brand.
The three 4 screen independent units that cover the national capital, New Delhi from Patel Nagar, Janak Place, and Nehru Place are a well-known landmark to every Delhiite and remain synonymous with a complete cinema entertainment and the finest experience for their consumers. Today this experience is further enjoyed by the people of Indore, Jodhpur, Aurangabad, Rohtak and Mysore.
Rationale of the scheme:
- Satyam’s operational properties which will now be a part of INOX are:
Source: https://www.inoxmovies.com
Note: For cities total, overlapping cities have been deducted
Prior acquisitions:
In 2007, INOX acquired Calcutta Cine Pvt Ltd (CCPL). Board of Directors of the company and CCPL approved issue of 33 equity shares of Rs 10 each of the company for every 1 equity share of Rs 1,000 of CCPL
In 2013, INOX acquired 1,75,65,288 Equity Shares of Fame India Ltd. standing at 50.27% of the issued and paid-up capital by making Fame India Ltd. subsidiary.
Numbers at the time of acquisition:
| INOX | FAME | Total | |
| operational properties | 38 | 25 | 63 |
| screens | 144 | 95 | 239 |
| seating capacity | 40,140 | 26,487 | 66,627 |
| Presence in cities | 25 | 12 | 37 |
Advantages of the Merger to INOX:
- Strong presence across all the major markets in the country
- Strong foothold in Northern India, especially Delhi region
- Catering to approximately 5 crore guests this year
- Marginal geographical overlap = wider penetration
Benefits for the industry:
- Consolidation of the fragmented exhibition industry
- Ability to provide broader release platform for films of all genres
- Enhances influence over strategic decisions in industry and
Revenue enhancement:
- One stop shop for pan India advertising campaigns.
- Larger footfall and eyeball numbers to improve advertising and marketing revenues.
- Better pricing power.
Strategic plan of INOX:
- 1000 plus films commercially released every year in India.
- The highest number of admissions anywhere in the world with around 4 billion tickets sold annually. In a country where movies are a way of life, we are grossly under-screened.
- Approximately 9,500 number of screens across India, i.e., 8 screens per million population
Compare this with:
- 30 screens per million in China; 60 screens per million in the UK, 120 screens per million in the US.
Future growth plan of INOX
Much of the company’s capacity expansion will happen in the northern region, where the company plans to enhance its presence. Northern and western regions have a higher share in all-India ticket collections. Hence, enhancing its presence in the North works well for Inox in the coming quarters.
In the last 3 years, the multiplex industry has undergone considerable changes. With two crucial acquisitions – PVR acquiring Cinemax and Inox acquiring Fame India, equations in terms of market share have been defined better. The multiplex industry, which had six players three years ago, is now more concentrated, with just two players PVR and Inox accounting for over 45% of the industry’s total screen capacity of 1,800-2,000. With its expansion on track, Inox is expected to make the most of film business, which is expected to grow at a CAGR of 11.5% to reach Rs 19,330 crore by 2017.
Conclusion:
As INOX Leisure Ltd and Satyam Cineplexes Ltd deal is now expected to be closed after in December 2016 due to pending court approval, both the companies will have to work out the modalities for a quick integration.
