Cineworld Group plc (CNWGY) said Wednesday, Nov. 29, that it is in advanced discussions with Regal Entertainment Group (RGC) over a possible $3.6 billion takeover bid, sending shares up in premarket trading.
The London-based cinema chain said that it was finalizing due diligence in relation to a possible all-cash offer for the U.S.'s second largest cinema chain.
Cineworld said it was considering a possible bid to buy 100% of Regal's outstanding shares at $23 each. The $3.6 billion takeover bid is almost double Cineworld's market cap of £1.63 billion ($2.18 billion).
Regal shares were up 6% in premarket trading, with an indicative opening price of $20.81. Shares closed at $19.63 on Tuesday in New York, after gaining 7.56%.
Cineworld shares fell 15.08% in London, changing hands at 589.79 pence, on worries over how the company would finance the deal.
Cineworld said 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.
The transaction would be classified as a reverse takeover, Cineworld said.
If the deal could through it would double Cineworld's size and would provide it "with a highly attractive platform in the world's largest cinema market," the company said.
"Cineworld would only proceed with the potential transaction in circumstances and on terms which it believes would be accretive to shareholder value," it said, adding that there was no certainty that the discussions would lead to a deal.
More of What's Trending on TheStreet: