PVR to buy Sathyam Cinemas. Movie Goers Upset
The latest buzz that is doing the rounds across the city is that PVR is negotiating to acquire SPI Cinemas.
PVR group seems set to acquire Chennai's premier movie exhibition company SPI Cinemas, popularly known as Sathyam Cinemas, in what could end up to be the biggest deal in Bijli's career as well for India's multiplex sector. Multiple sources aware of the on-going discussions said save last-minute developments, the deal may close for a rather steep valuation of approximately Rs 750-1,000 crore for just 40 odd screens, located predominantly in the Southern metro. To put this in perspective, last month Carnival Cinemas paid a little over Rs 700 crore to buy out Anil Ambani's Big Cinemas that has 242 screens across the country.
This also underscores the growing consolidation frenzy that has gripped the multiplex industry in recent times - with 5 deals in 12 months, valued at over Rs 1600 crore --- as theatre operators seek to improve their bargaining power with film studios and distribution companies to gain a bigger share of box office receipts. Additionally, with a prolonged slowdown in commercial real estate (read malls that typically anchors these multiplexes), dominant players feel inorganic growth is faster than time consuming greenfield developments.
Reddy family owned chain, The SPI Group currently runs a cinema exhibition, distribution and production business but are known for their portfolio of some of the most iconic cinema destinations across South India. According to the company's website, it currently operate close to 40 screens under 5 categories -- Sathyam, Escape, thecinema, Luxe, their uber premium offering and S2 Cinemas and are poised to open over 50 screens by early 2015. PVR, with 454 screens in 102 locations across 43 cities, is the largest cinema exhibitor in the country today.
Earlier in December, newspaper reports had said that the two sides were in negotiations
What makes SPI Cinemas such a prized catch despite a small portfolio of just 40 odd screens that are largely concentrated in just 1 city - Chennai. For one, it is amongst the most profitable operators today with one of the highest average occupancy - over 65% -- anywhere in the country. It draws over 3 million customers a year.
Movie Goers UpsetAs soon as news got out that behemoth multiplex chain PVR Cinemas was looking to acquire the home-grown SPI Cinemas brand, outrage, anger and a wee bit of sentiment flowed forth from movie goers.
Still referred to as Sathyam Cinemas, the original name of the theatre plex that has become a landmark in Royapettah, the group has since expanded rapidly and controls at least 40 screens across Chennai and Coimbatore.
“You’d have to experience a movie at Sathyam to know why I’m ranting so much. PVR is a failure in Chennai, quite obviously due to their pathetic movie experience, and their insipid butter popcorn. Right from their bad website, staff, food quality, lack of RDX or Atmos and their inflated booking charges, PVR has everything wrong and could very well damage the hard-earned Sathyam brand if not destroying it,” said Karthik Murali, a market analyst, on Twitter.
Social media sites were littered with many such outpourings as the day progressed.
Incidentally, PVR controls over 250 screens across the country and has two multiplexes in Chennai alone, with one more potential one coming up on GST Road.
In fact, a petition was floated on change.org asking interested people to sign a petition to save SPI Cinemas from acquisition. It has been just shy of 400 pledges thus far, but it’s something that is expected to gain a lot of momentum quickly.
Meanwhile, the Gurgaon-based PVR Cinemas declared to the BSE after media reports, that there were no such negotiations going on with the Kiran-Reddy-promoted SPI group. “As part of our continuing business strategy to look for growth opportunities, the company is constantly on the lookout for and in discussions with potential partners to further it’s business. But the company is not aware of any negotiations or transactions with SPI Cinemas that require disclosure,” it stated in its reply to the clarifications sought by the Bombay Stock Exchange and National Stock Exchange on Monday.
SPI Cinemas declined to comment on the issue.