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Regal Buyout, Cinemark Subscription Lifts Movie Theater Stocks

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Shares of Regal Entertainment Group popped on Tuesday after the U.S. movie theater chain announced that it agreed to be purchased by U.K.-based Cineworld Group PLC. Despite the creation of a more powerful competitor, this move helped other domestic movie theater companies’ shares surge.

Cineworld agreed to acquire Regal for $3.6 billion in cash. As part of the deal, Regal stockholders are set to receive $23.00 per share, which represents a 43.2% a premium compared to Regal’s 30-day unaffected weighted average. Including the assumption of Regal’s debt, the total deal is valued at $5.9 billion, according to company statements.

The deal will create the second-largest movie theater company in the world and will help Regal compete more directly with industry leader AMC Entertainment Holdings (AMC - Free Report) . The combination of the largest movie theater chain in the U.K. and Regal’s 7,315 domestic screens will create a giant with well over 9,000 screens.

“We believe this partnership with Cineworld will enhance Regal’s ability to deliver a premium movie-going experience for customers and further build upon our strategy of introducing innovative concepts and premium amenities designed to enhance the value of our theatre assets,” Regal CEO Amy Miles said in a statement.

After the announcement, shares of Regal climbed over 9.30% to hit $22.70 per share, which is just 3% below their 52-week high. The smaller of the two cinema powers, Cineworld, saw its stock price dip around 0.50%.

In theory, the move will help the combined theater company compete in an unforgiving movie-going environment that has become more beholden to box office hits than ever before—especially as the rise of streaming services such as Amazon Prime (AMZN - Free Report) , Netflix (NFLX - Free Report) , and Hulu provide entrainment lovers more options.

Theaters have struggled to adjust in the new entertainment world as users now have access to hundreds of movies on demand per month for roughly the same price as one movie ticket.

Now, movie theater investors seem to be convinced that a deal of this size could be good for the theater business overall. Shares of AMC gained nearly 3%, while Imax (IMAX - Free Report) shares climbed about 0.90%.


Still, one U.S. movie theater power, Cinemark Holdings (CNK - Free Report) , saw its shares fall today. However, this seemingly has more to do with the fact that Cinemark just announced that it is set to offer an $8.99 per month subscription service.

The subscription —the first of its kind by a large U.S. operator—will allow users to see one movie a month and get a 20% concessions discount. Subscribers can bring a friend for an additional $8.99 a film.

This move comes after MoviePass’ monthly movie theater subscription concept began to shake up the industry. It seems that Cinemark investors might be worried that this new plan could be the start of a deep-discount race to the bottom.

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