ADAG-Shringar acquisiton talks fall out over valuation differences

The Anil Ambani led-ADAG group is in the news for another merger and acquisiton deal, and it seems that this may also go sour. Negotiations between ADAG and the Shroffs of Shringar Cinema for buying out Shringar seem to have hit a roadblock due to differences on the price that ADAG has reportedly offered to Shringar’s shareholders.

Reliance-ADAG was willing to offer Rs. 58 per share and an additional Rs. 15 was offered for a non-compete agreement to the Shroffs, promoters of Shringar Cinemas. The clause was to ensure that the future plans of the Shroffs don’t affect the Reliance-ADAG group, which already has an interest in the sector through Adlabs Films.

The deal would make Adlabs Films the biggest player in the multiplex business along with the Delhi-based PVR, which currently has close to 75 screens across the country. The acquisition would give Adlabs access to Shringar Cinemas’ approximately 35 screens, putting Adlabs at a total of about 78 screens pan-India.

It has been learnt that large stakeholders in Shringar Cinemas had expressed reservations on the differences in the price offered by ADAG to the promoters and to shareholders. Temasek Holdings, one of the largest shareholders in Shringar Cinemas with close to 14%, expressed its reservations on the pricing, even when the Shroff family had agreed to this deal in-principle. The owners of Shringar Cinemas have been in talks with large players, including the Mukesh Ambani-led Reliance Industries, but the talks had failed, again, due to valuation differences.

While the deal is off now, it is expected that talks between both parties could resume, as a consolidation in the multiplex space is inevitable. Shringar runs the Fame brand of multiplexes and plans to add seven to nine multiplexes each year to touch 227 screens across 50 sites by March 2011.

Read he article in The Economic Times.