CCI asks PVR to sell some assets to clinch deal with DT Cinemas

Industry:    2016-03-22

The Competition Commission of India (CCI) has asked PVR Cinemas to first divest some of its assets if it wants to acquire DT Cinemas, which is real estate major DLF’s cinema exhibition business. The decision follows concerns that the Rs 500 crore PVR-DT deal might have adverse effects on competition in certain areas of north India. Sources privy to the developments said the internal order of CCI had the support of four members of a total of seven. The acquisition, which PVR announced in June, would take its combined presence to 44 cities, with around 115 multiplexes and over 520 screens. “The company (PVR) has been found to be in a dominant position in certain areas. Now, after CCI’s decision, the company is deliberating with the fair trade regulator so that it can be decided which assets would be finally divested,” added the source. After a decision is taken regarding assets, the fair trade regulator is expected to come out with a final public order – listing all the assets which would have to be divested before acquisition – by the end of April. Both companies did not respond to e-mailed queries from Business Standard. At the time of deal announcement, PVR operated a network of 477 screens spread over 107 properties in 44 cities, whereas DT Cinemas had 29 screens with approximately 6,000 seats at eight locations in the National Capital Region (NCR) and Chandigarh. By the end of January, PVR had added 14 screens, taking the total number to 491. On December 12, CCI had sought comments from the public on this deal, after finding that prima facie the deal was likely to adversely impact competition. PVR has four brands across different price points – PVR Talkies, PVR Cinemas, PVR Premium and newly-launched PVR Icon. In the third quarter (Q3) of 2015-16, the company’s net profit was down seven per cent at Rs 29.33 crore, compared to the corresponding period last year. This was due to a steep increase in tax expenses, which went from nil in Q3 of 2014-15 to Rs 11.98 crore in Q3 of 2015-16. Experts say if CCI gives a green signal to the PVR-DT deal, the combined entity will get a considerable weight in the market and will provide more space for the entity to flex its muscle, while negotiating with film distributors. In a little over a year, this is at least the third time that the regulator has put a major deal for public scrutiny. Last year, the watchdog had sought comments from public on two mega transactions – the $4 billion Sun Pharma-Ranbaxy combination and Holcim-Lafarge deal. In both instances, the regulator had called for divestment of certain assets by the entities concerned to address anti-competition concerns.

print
Source: