PVR's DT deal hits roadblock

NEW DELHI: The Rs 60 crore-acquisition of DLF-owned DT Cinemas by entertainment firm PVR Ltd is stuck over differences between the two firms, said two persons familiar with the matter.

The deal has hit a roadblock with PVR not issuing shares on preferential basis to DLF on due date as part of the consideration, the first person privy to the development said.

PVR, in a disclosure to the stock exchanges, has said that preferential allotment of shares to DT Cinemas in part consideration for the acquisition has been deferred for certain pending compliances with regards to handover of properties to the company.

When contacted, both DLF and PVR executives denied there were any problems in the deal. “Everything is on track and these are mere rumours and speculations,” said Ajay Bijli, chairman and managing director of PVR Cinemas, which set up India’s first multiplex back in 1997.

“This information is wrong and baseless,” said the spokesman of the DLF, the country’s largest real estate company that entered multiplex business in 2003.

The exact reason why the deal is stuck could not be ascertained, but the second person aware of the development said it could be because of the rise in PVR’s acquisition cost due to a jump in its share prices.

As per the deal, signed on November 13, PVR was to pay Rs 20.02 crore in cash and issue 25.57 lakh fresh shares, or 9.09% of its diluted equity base, to DLF. The shares were estimated to worth Rs 40 crore at Rs 165 per share.

But PVR shares are now trading 20% higher, closing at Rs 199.60 on the Bombay Stock Exchange on Friday. At this price, the value of shares to be allotted to DLF would be worth Rs 50 crore, pushing up cost of transaction to more than Rs 70 crore.

This could be a bone of contention, although it could not be independently verified. The transaction was scheduled to be closed by January 1, 2010.

The acquisition would have helped PVR to enhance its presence in northern India where DT Cinemas has 26 screens across six locations. Besides, it would have got exclusive access to multiplex chains in all malls developed by the DLF group.
At present, PVR has 108 screens in 26 multiplexes across the country and plans to increase it to 165 screens by the end of this fiscal.

Over the last one year, DLF has been trying to sell all its non-core businesses as it wants to focus on real estate alone. It has sold its security firm TerraForce to world's largest security services provider G4S Plc.

As per a study by consultancy firm KPMG, there are close to 850 multiplex screens in the country, which is expected to grow to 1,500 screens in the next 2-3 years. The largest player in the industry is Anil Ambani’s Big Cinemas with 242 screens. Other big names include Inox Leisure with 108 screens and Fame India with 95 screens.