Regal Entertainment Group (RGC) Shares Surge on Cineworld Deal

Regal Entertainment Group (NYSE:RGC) shares are soaring as the company is reportedly the subject of a buyout from Cineworld Group Plc.

Regal Entertainment Group (RGC)The companies are merging into one large cinema giant that will have roughly 9,500 screens across the U.S. and Europe, creating the world’s second largest cinema group. With the deal, Cineworld will have footing in North America, which is the largest box office market in the globe.

Cineworld currently has more than 2,000 screens in 221 sites, while also being the owner of Picturehouse Cinemas, another movie chain. The move comes at a time when streaming movies and TV shows has taken over the art of going out to watch a film in a big screen.

The U.S. experienced its lowest box office earnings in more than two decades, but annual takings have still managed to surpass $11 billion for the last two years. In the UK, cinema attendance has been going up, gaining 8% around so far in 2017 with roughly 165 million tickets sold each year.

Cineworld CEO Mooky Greidinger said that the company expects to bring Regal’s profit margins closer to Cineworld, the latter of which has a 22% margin, while Regal has slightly less than a 20% profit margin.

Cineworld will reportedly pay about $23 a share for Regal by asking investors to raise £1.7 billion, roughly $2.28 billion, by buying new shares through a rights issue, a move that will likely depress the price of existing shares.

RGC stock gained 9.5% Tuesday.

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