The Cineworld Group plc (LON: CINE) share price rallied 39.4% after news broke that its rival Vue International had secured backing from Barings and Farallon Capital Management to make an offer for Cineworld by the deadline set for later this week.
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Investors cheered the news, which confirms that at least one bidder was interested in acquiring all of Cineworld’s assets when many feared that the company might not attract any bids after rivals AMC Entertainment and Cineplex seemed uninterested in acquiring the entire company.
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Investors welcomed Vue International’s emergence as a potential suitor for Cineworld, given that the company recently completed a financial restructuring with its lenders and emerged from the process a week ago with a robust balance sheet.
Barings and Farallon Capital Management had promised to give funds to Vue International funds for strategic acquisitions, which makes sense why the company has emerged as a substantial bidder for Cineworld and its assets.
However, Cineworld’s insistence on bidders submitting bids for all of its assets poses a challenge to interested buyers since some are willing to buy its US assets. In contrast, others are interested in European assets.
Vue is said to be interested in Cineworld’s UK and European assets. Hence, it might have to find other buyers for the company’s US assets since it may not be keen to expand its operations into the United States.
Meanwhile, investors will have to wait a few days for the deadline to lapse before we can get all the details on the bids submitted to Cineworld. Still, many are excited to see Vue International step into the arena and submit a legitimate bid for Cineworld’s assets.
However, Vue refused to comment on the matter, with its spokesman speaking vaguely about the chances for an acquisition.
A Vue spokesperson said:
“Our focus at Vue remains on managing the strong recovery we are seeing in our business. While it would therefore be premature to speculate about any acquisitions at this stage, we continually evaluate a range of possible opportunities.”
*This is not investment advice.
The Cineworld share price surged 39.39% to trade at 5.85p, from Friday’s closing price of 4.20p.