Why Regal Entertainment Group Shares Rose 24% in November

Early rumors of a buyout bid helped the troubled cinema chain's shares bounce out of their trough.

Anders Bylund
Anders Bylund
Dec 11, 2017 at 3:39PM
Consumer Goods

What happened

Shares of Regal Entertainment (NYSE:RGC) gained 23.6% in November, according to data from S&P Global Market Intelligence. The gains were sparked by a early talk of a buyout deal.

So what

Near the end of November, the movie theater chain started to hammer out the details of a deal under which it would be acquired by British peer Cineworld. Mere rumors of the deal were enough to drive Regal's share prices 10% higher, and they took another 6% boost when the company confirmed it. Cineworld presented a $5.9 billion buyout offer in early December, triggering a final 9.2% jump in Regal's market value.

A movie theater, packed with happy viewers.

Image source: Getty Images.

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Now what

The acquisition has been approved by the boards of both companies, and the privately held Anschutz Corp. already signed a statement in support of this transaction. Anschutz controls 67% of Regal's total voting power, but the published support from Cineworld shareholders is a bit smaller so far, and the deal still has to get approval from regulators.

That being said, there's no real reason to expect Cineworld's bid will stumble on these minor speed bumps, nor that any competing offers would spark a bidding war. If anything, the deal could fall apart if the smaller Cineworld fails to drum up $4 billion of new debt and $2.3 billion in share offerings to finance its Regal ambitions.

If you picked up Regal shares on the cheap in August, you could walk away with a 65% return on your investment today. Not too shabby for a stock that has trailed the broader market over the last one, three, and five years.