Cineworld Group Plc (LON: CINE) announced a $3.6 billion (£2.7 billion) deal on Tuesday, to buy US cinema chain Regal.
The deal will lead to Cineworld’s expansion in the US and will create the world’s second largest cinema group with a total of 9,542 screens, 7,315 of these in the United States.
Whilst cinemas face fierce compeition from streaming services such as Netflix, Cineworld Chief Executive Mooky Greidinger was confident in the expansion.
“When they go to the cinema, they go to the cinema and who loves to go to the cinema more than the Americans?,” he said.
“Regal is a great business and provides Cineworld with the optimal platform on which we can continue our growth strategy.”
Regal currently has profit margins of 20 percent, something which Greidinger hopes to raise to Cineworld’s 22 percent.
When talks between the groups came out last week, shares in Cineworld plunged by 20 percent. This is contrary to shares in Regal, which have increased since about 13 percent since talks were first revealed.
News of the confirmed deal say shares fall by 2.5 percent at midday. Regal shares were up 6.1 percent in pre-market trading.
Despite the drop in shares, Greidinger did not regret the deal saying he could “fully understand investors were taken by surprise”.
“We are not sprinters. We are running for the long-term and there is now a little bit of weakness. But I’m sure now the deal has been properly announced and we are able to talk and explain, people will see the great potential here.”
The UK cinema group will pay $23 a share for Regal. This deal represents a premium of 12 percent to Regal’s closing price on Monday.
Regal is the second-largest cinema chain in the US. Number one is currently AMC (NYSE: AMC), which owns the UK’s Odeon.