Cineworld Group PLC  (CNWGY) said Tuesday, Dec. 5, it reached an agreement to complete its planned $5.8 billion takeover of Regal Entertainment Group (RGC) to create the world's second-largest cinema operator.

Cineworld will pay $23 a share for Regal, a price that values the Knoxville, Tennessee-based group at $3.6 billion which, along with around $2.2 billion in liabilities, gives the deal, which will be classified as a reverse takeover, an enterprise value of $5.8 billion. Cineworld said it will fund the transaction with a £1.7 billion ($2.3 billion) rights issue underwritten by Barclays, HSBC and Investec and £4 billion in debt capital. 

"We have long had high respect for Regal and for its strong position in the largest box office market in the world and we are delighted that the Regal Directors have unanimously agreed to recommend our offer to their shareholders," said Cineworld CEO Mooky Greindinge. "Regal is a great business and provides Cineworld with the optimal platform on which we can continue our growth strategy.

"Both companies are strongly committed to bringing a high end cinematic experience to their customers," he added. "Consolidation is an important move forward and the best practice we have successfully rolled out across Europe will be the key driver to continued success."

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The combined group will have just over 9,500 screens across the U.S. and European movie theater markets, the companies said, and the tie-up will be "strongly" accretive to earnings in the first full year that follows the deal's completion, which both expect to be 2019.

Cineworld said previously that it it would fund the potential acquisition through a mixture of incremental debt and a material equity raise through a rights issue, including a commitment to full subscription from Cineworld's 28% shareholder, Global City Holdings NV.

Cineworld shares were down 1% in London and have fallen some 24% since the deal was first floated on Nov. 29, as investors re-set price expectations owning to the dilution of the rights issue that will partially fund the deal.

Regal Entertainment shares were rising 7.9% in premarket trading to $22.36.

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