On 5 December 2017, Cineworld Group plc (“Cineworld” or the “Company”) and Regal Entertainment Group (“Regal”) announced that they had reached agreement on the terms of a proposal for Cineworld to acquire, for cash, the entire issued and to be issued share capital of Regal (the “Acquisition”) (Cineworld and Regal together, the “Enlarged Group”). The Acquisition will be at a price of US$23.00 per Regal share, which values the entire issued and to be issued share capital of Regal at US$3.6 billion (£2.6 billion), with an implied enterprise value of US$5.8 billion (£4.2 billion).
Today, Cineworld announces a fully underwritten rights issue, which is intended to raise proceeds of approximately £1.7 billion to be used to fund part of the cash consideration for the Acquisition (the “Rights Issue”).
The Rights Issue will result in the issue of 1,095,662,872 new ordinary shares (representing 400 per cent. of the existing issued share capital of Cineworld and 80 per cent. of the enlarged issued share capital immediately following completion of the Rights Issue) (the “New Ordinary Shares”). The Rights Issue will be on the following basis:
4 New Ordinary Shares at 157 pence per New Ordinary Share for every 1 Existing Ordinary Share
Details of the Rights Issue
Pursuant to the Rights Issue, the Company is proposing to offer 4 New Ordinary Shares by way of rights to holders of Cineworld ordinary shares as at the close of business on 31 January 2018 (the “Record Date”) (“Qualifying Shareholders”). The offer is to be made at 157 pence per New Ordinary Share (the “Rights Issue Price”), payable in full on acceptance by no later than 11.00 a.m. on 19 February 2018. The Rights Issue is expected to raise gross proceeds of approximately £1.7 billion. The Rights Issue Price represents a discount of approximately 34 per cent. to the Theoretical Ex-Rights Price based on the closing middle-market price of 563.5 pence per Existing Ordinary Share (as defined below) on 16 January 2018 (being the last business day before the announcement of the terms of the Rights Issue).
The New Ordinary Shares, when issued and fully paid, will rank parri passu in all respects with the ordinary shares in issue immediately prior to the Rights Issue (the “Existing Ordinary Shares”), including the right to receive any dividends or distributions made, paid or declared after the date of the issue of the New Ordinary Shares. Applications will be made to the FCA and to the London Stock Exchange for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities (“Admission”). It is expected that Admission will occur and that dealings in the New Ordinary Shares (nil paid) will commence on the London Stock Exchange at 8.00 a.m. on 5 February 2018.
Global City Holdings B.V. (the “Major Shareholder”), which holds in aggregate 76,626,344 Ordinary Shares as at the Latest Practicable Date (representing 28 per cent. of the Company's existing issued ordinary share capital) has agreed to take up its full pro rata entitlement under the terms of the Rights Issue, in order to maintain its shareholding in Cineworld and, following completion of the Acquisition (“Completion”), the Enlarged Group.
The Rights Issue has been fully underwritten by Barclays Bank PLC (“Barclays”), HSBC Bank plc (“HSBC”) and Investec Bank plc (“Investec”) (Barclays, HSBC and Investec together, the “Underwriters”).
Due to its size, the Acquisition is classed as a reverse takeover under the Listing Rules of the Financial Conduct Authority (the “Listing Rules”) and accordingly it is conditional on, amongst other things, the approval of Cineworld's shareholders at a general meeting of the Company which is to be held on 2 February 2018 (the “General Meeting”). Shareholders will be asked to vote in favour of resolutions to approve the Acquisition and to authorise the Company to proceed with the Rights Issue (as defined below) (the “Resolutions”). A notice of the General Meeting will be released with the combined class 1 circular and prospectus (the “Prospectus”), which is expected to be published today, subject to approval by the UK Listing Authority. The Cineworld Directors consider that the Resolutions are in the best interests of Cineworld and its shareholders and unanimously recommend that shareholders vote in favour of the Resolutions.