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5 December 2017

CINEWORLD GROUP PLC

PROPOSED US$5.8bn ACQUISITION OF REGAL ENTERTAINMENT GROUP AND FULLY UNDERWRITTEN £1.7bn RIGHTS ISSUE

Summary

·    Cineworld Group plc ("Cineworld" or the "Company") and Regal Entertainment Group ("Regal") today announce that they have reached agreement on the terms of a recommended proposal for Cineworld to acquire, for cash, the entire issued share capital of Regal (the "Acquisition").

·    The acquisition price of US$23.00 per Regal share values the entire issued and to be issued share capital of Regal at US$3.6 billion (£2.7 billion), with an implied enterprise value of US$5.8 billion (£4.3 billion).

·    The Acquisition will create a globally diversified cinema operator across ten countries and allow Cineworld to access the attractive North American cinema market, which has the largest box office market in the world with an industry box office of greater than US$10 billion in each year since 2008 and stable admissions in excess of 1.25 billion in each year over the same period.

·    Following completion of the Acquisition ("Completion"), Cineworld and Regal (together, the "Enlarged Group") will have a combined 9,542^([1]) screens across the United States and Europe making it the second largest operator in the world (by number of screens).

·    Attractive financial effects of the Acquisition:

o  Expected to be strongly accretive to earnings in the first full year following Completion (FY 2019);

o  Cineworld's return on invested capital associated with the Acquisition expected to meet its cost of capital in the first full year after Completion;

o  The Cineworld Board expects to be able to maintain Cineworld's existing dividend policy following Completion, underpinned by the future prospects of the Enlarged Group; and

o  The Enlarged Group is expected to be levered c.4.0x net debt/pro forma 2017E EBITDA^([2]) (if Completion were to occur at the end of FY 2017 and full annualised pre-tax combination benefits of US$100 million were taken into account in calculating that EBITDA) with strong cash generation to drive a material deleveraging profile.

·    The Cineworld Board estimates that, following Completion, the Enlarged Group will be able to achieve annualised pre-tax combination benefits of US$100 million and additional annual structuring benefits of US$50 million.

·    Since Cineworld's combination with Cinema City Holding B.V. ("Cinema City") in 2014 (the "Cinema City Combination"), the Cineworld management team has grown EBITDA and revenue in the period FY 2013^([3]) to FY 2016 by a compound annual growth rate ("CAGR") of 10.2 per cent. and 6.7 per cent., respectively, with an increase in EBITDA margin over the same period. This growth has been achieved by enhancing the customer experience, successfully acquiring new sites, diversifying multiplex offerings, implementing loyalty schemes and adopting a highly disciplined approach to cost. The Cineworld Board believes that the Cineworld management team can replicate this success with the Enlarged Group by implementing similar initiatives within the Regal business to further enhance shareholder value.

·   The Acquisition, related expenses and the refinancing of the existing Cineworld and Regal debt will be funded by the proceeds of a rights issue by Cineworld (fully underwritten on a volume basis by Barclays Bank PLC ("Barclays"), HSBC Bank plc ("HSBC") and Investec Bank plc ("Investec")), which will raise approximately £1.7 billion (the "Rights Issue"), and a portion of the approximately US$4.0 billion (approximately £3.0 billion) to be raised through committed debt facilities (the "Debt Facilities" and, together with the Acquisition and the Rights Issue, the "Transaction").

·   The size of the Acquisition means it is classed as a reverse takeover under the Listing Rules of the Financial Conduct Authority (the "Listing Rules") and accordingly it is conditional, amongst other things, on the approval of Cineworld's shareholders at a general meeting of the Company proposed to be held in February 2018 (the "General Meeting").  The Cineworld Board intends to unanimously recommend in the Combined Circular and Prospectus that Cineworld shareholders vote in favour of the resolutions to approve the Acquisition and to authorise Cineworld to proceed with the Rights Issue (the "Resolutions").  The directors of Cineworld intend to vote in favour of the Resolutions in respect of their own beneficial holdings, which amount to approximately 0.9 per cent. of Cineworld's total issued ordinary share capital as at the date of this announcement.^([4])

·   The largest shareholder in Cineworld, Global City Holdings B.V. (the "Major Shareholder" or the "Greidinger Family Holding Vehicle"), which holds approximately 28 per cent. of Cineworld's total issued ordinary share capital as at the date of this announcement, has agreed to take up its full pro rata entitlement under the terms of the Rights Issue, in order to maintain its shareholding in Cineworld and, following Completion, the Enlarged Group. A sovereign wealth fund has agreed to co-invest in the Greidinger Family Holding Vehicle. The Major Shareholder has also agreed to vote in favour of the Resolutions in relation to its holding.

·   The Anschutz Corporation, which holds shares representing approximately 67 per cent. of the voting power in Regal, has agreed to provide its written consent to approve the Acquisition, with effect upon approval of the Transaction by Cineworld shareholders and satisfaction of the conditions set forth in the voting and support agreement. Delivery of written consent from The Anschutz Corporation is the only Regal stockholder action required to approve the Acquisition.

·   The board of the Enlarged Group will be the current Cineworld Board and the Enlarged Group's headquarters and registered office will be the current registered office of the Company.

·   Cineworld expects to publish a combined circular and prospectus, including the notice of General Meeting (the "Combined Circular and Prospectus") in January 2018. Subject to satisfaction of the conditions to the Acquisition, Completion is expected to occur during the first quarter of 2018.

Commenting on the Acquisition, Mooky Greindinger, CEO of Cineworld, said:

"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.

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. 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.

We strongly believe in our strategy which is to create 'The Best Place to Watch a Movie!'

We have great teams at both Regal and Cineworld and we trust that based on their skills and professionalism we will lead the joint company to become a great success story."

Amy Miles, CEO of Regal, said:

"We are excited to have reached an agreement with Cineworld, at a price that represents a meaningful premium on Regal's unaffected share price for our shareholders. Since becoming a public company, Regal has focused on delivering superior shareholder value, including return of capital in the form of regular and special dividends. We believe the transaction announced today provides compelling value for our stockholders.

We believe this partnership with Cineworld will enhance Regal's ability to deliver a premium movie-going experience for customers and further build upon our strategy of introducing innovative concepts and premium amenities designed to enhance the value of our theatre assets. The combination of our two great companies, Cineworld's tremendous success in the UK, as well as other markets they have entered since, and Cineworld's commitment to maintain a strong presence in the US and Knoxville, provide a global platform positioned for continued growth and innovation."

This summary should be read in conjunction with the full text of this announcement.

Analyst Meeting and Conference Call

A meeting and conference call for analysts will be held at 9:30 a.m. at Merchants Hall, Four Seasons Hotel London at Ten Trinity Square, 10 Trinity Square, London EC3N 4AJ on 5 December 2017. Details of the conference call are as follows:

Enquiries

Cineworld

Barclays (Joint Financial Adviser, Joint Underwriter, Joint Global Coordinator and Joint Corporate Broker to Cineworld)

HSBC (Joint Financial Adviser, Joint Underwriter, Joint Global Coordinator to Cineworld)

Investec Bank plc (Sponsor, Joint Underwriter, Joint Bookrunner and Joint Corporate Broker to Cineworld)

Powerscourt (Public Relations Adviser to Cineworld)

Notes to editors

About Cineworld Group plc

Cineworld Group plc was founded in 1995 and listed its shares on the London Stock Exchange in May 2007. The Company has grown through expansion and by acquisition to become one of the leading cinema groups in Europe. Cineworld currently operates 2,227 screens across 232 sites in the UK and Ireland, Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania and Israel.

1.            Introduction

Cineworld and Regal today announce that they have reached agreement on the terms of a proposal for Cineworld to acquire, for cash, the entire issued and to be issued share capital of Regal. The Acquisition will be implemented by way of a merger in accordance with the laws of the State of Delaware at a price of US$23.00 per Regal share, which values the entire issued and to be issued share capital of Regal at US$3.6 billion (£2.7 billion), with an implied enterprise value of US$5.8 billion (£4.3 billion). The Acquisition implies an enterprise valuation multiple of 8.0x 2017E EBITDA (including combination benefits).^([5])

Regal operates one of the largest and most geographically diverse cinema estates in the United States, consisting of 7,315 screens in 561 cinemas in 43 states along with Guam, Saipan, American Samoa and the District of Columbia, as at 30 September 2017. Regal operates, develops and acquires multi-screen cinemas primarily in mid-sized cities and suburban areas of larger cities throughout the United States. Regal is a corporation organised under the laws of the State of Delaware and its Class A common stock is traded on the New York Stock Exchange under the symbol "RGC". In FY 2016, Regal generated total revenues of US$3,197 million (£2,373 million)^([6]) and Adjusted EBITDA of US$630 million (£468 million).^([7])

The Acquisition will create a globally diversified cinema operator across ten countries and allow Cineworld to access the attractive North American cinema market, which has the largest box office market in the world with an industry box office of greater than US$10 billion in each year since 2008 and stable admissions in excess of 1.25 billion in each year over the same period.

Since the Cinema City Combination in 2014, the Cineworld management team has grown EBITDA and revenue in the period FY 2013^([8]) to FY 2016 by a CAGR of 10.2 per cent. and 6.7 per cent., respectively. This growth has been achieved by enhancing the customer experience, through proactive management of its estate including successfully acquiring and opening new sites, diversifying multiplex offerings, implementing loyalty schemes and adopting a highly disciplined approach to cost. The Cineworld Board believes that the Cineworld management team can replicate this success with the Enlarged Group by implementing similar initiatives within the Regal business to further enhance shareholder value.

The Acquisition, related expenses and the refinancing of certain existing Cineworld and Regal debt will be funded by:

·      the proceeds of the fully underwritten Rights Issue, which will raise approximately £1.7 billion;

·      approximately US$4.0 billion (£3.0 billion) through committed Debt Facilities; and

·      existing cash on balance sheet.

Further details of the Rights Issue and Debt Facilities are set out in paragraph 6 below.

The Major Shareholder, which holds approximately 28 per cent. of Cineworld's total issued ordinary share capital, has agreed to take up its full pro rata entitlement under the terms of the Rights Issue to maintain its shareholding in Cineworld, demonstrating its strong ongoing commitment to the Cineworld business and, following Completion, the Enlarged Group.

Due to its size, the Acquisition is classed as a reverse takeover for Cineworld under the Listing Rules. Cineworld is therefore required to seek the approval of its shareholders for the Acquisition at the General Meeting. Cineworld shareholders will be asked to vote in favour of the Resolutions.  Notice of the General Meeting and further information on the Transaction will be set out in the Combined Circular and Prospectus expected to be published in January 2018.

As a consequence of the Acquisition being a reverse takeover under the Listing Rules, the listing of Cineworld's ordinary shares (including the new ordinary shares proposed to be issued pursuant to the Rights Issue) (the "Ordinary Shares") on the premium listing segment of the Official List will be cancelled upon Completion. Applications will be made to the UK Listing Authority for the Ordinary Shares to be re-admitted to the premium listing segment of the Official List and to the London Stock Exchange for the Ordinary Shares to be re-admitted to trading on the main market for listed securities (together, "Re-admission"). Re-admission is expected to occur immediately following (or as soon as practicable after) Completion.

2.             Background, Strategy and Rationale for the Acquisition and the Rights Issue

2.1          Background and strategy

Cineworld today is the second largest cinema business in Europe (by number of screens) operating in nine different countries. The Company was transformed by its 2014 combination with Cinema City (the predecessor to which was started by the Greidinger family in 1929) as a result of which it gained an expansive portfolio of strong market positions in a number of attractive and growing markets. The Cinema City Combination also provided Cineworld with a diversified revenue base, material pre-tax cost combination benefits, as well as significant scope to derive additional benefits from its combined operations through operational improvements and the sharing of best practice between the businesses. The Cinema City Combination has exceeded the Cineworld Board's expectations and delivered an attractive return on invested capital. Since the Cinema City Combination, Cineworld, under the leadership of CEO Mooky Greidinger and deputy CEO Israel Greidinger, has reinforced its market leading position, adding 263 screens and growing admissions by 11.4 million to over 100 million from FY 2013^([9]) to FY 2016.

Cineworld's success in enhancing shareholder value since the Cinema City Combination has been based around its strategy to "Make Cineworld the best place to see a movie" through five key pillars:

·      "Deliver a great cinema experience for all cinemagoers, every time" - Cineworld strives to ensure that its cinemas are comfortable, safe, clean and well-equipped, thereby giving its customers a great experience.

·      "Continue to expand our estate and look for profitable opportunities to grow" - Cineworld is focused on growth through selective new openings and acquisitions. Through consistent cash generation and its existing debt facilities, Cineworld has the financial strength to take advantage of opportunities which present themselves.

·      "Ensure that we enhance our existing estate so we deliver a consistent level of quality across the Group" - Providing Cineworld's customers with high quality cinemas throughout the estate is of upmost importance. Cineworld's refurbishment and construction programme is at the heart of achieving this goal.

·      "Be leaders in the industry by offering our customers the latest audio and visual technology" - expanding the premium formats such as IMAX, Superscreen, 3D, 4DX and VIP auditoriums and ensuring Cineworld invests in the latest innovative technology.

·      "Drive shareholder value by delivering our growth plans in an efficient and effective way" - To be able to reward shareholders, Cineworld remains focused on driving revenues, increasing earnings and prudently managing its cash position.

Since the Cinema City Combination, the implementation of this strategy has delivered total shareholder returns of 100 per cent., of which 86 per cent. is share price appreciation, between 10 January 2014 and 27 November 2017. Over three years on from the successful integration of Cinema City into the Cineworld Group, the Cineworld Board believes Cineworld is now well positioned to continue to leverage its scale and the Cineworld management team's significant experience in operations, acquisitions, market expansion, refurbishments and marketing by embarking on the next phase in Cineworld's growth by acquiring Regal and entering the world's largest box office market, the United States.

2.2          Rationale for the Acquisition

Gaining Access to the Attractive US Cinema Market

The acquisition of Regal will provide Cineworld with a meaningful footprint in the US cinema market, the largest box office market in the world. The North American box office grossed over $11 billion in 2016 with annual attendance of approximately 1.3 billion, and represented approximately 29 per cent. of global box office revenue. Moreover, the North American box office grew at a CAGR of approximately 4 per cent. in the period from 1986 to 2016, exceeding US$10 billion in each year since 2008 and generating box office records in each of 2012, 2013, 2015 and 2016. The Cineworld Board also notes the importance of the US cinema market as the home to some of the world's largest and most influential movie production studios.

Cineworld believes that a key attraction of the US market is the long-term popularity of the cinema as an out-of-home entertainment activity. North America has one of the highest per capita cinema attendance rates in the world at 3.7 attendances per annum. The cinema remains one of the most affordable out-of-home entertainment activities in the United States, attracting more people than any other form of paid day-to-day leisure pursuit. For example, more people in North America went to the movies in 2016 than attended all US theme parks, Major League Baseball, National Football League, National Basketball Association and National Hockey League fixtures combined.

From a competitive perspective, Cineworld believes that Regal holds a strong position in the US market, where it is the second largest cinema operator (by number of screens), with approximately 20 per cent. market share by box office and approximately 18 per cent. by screens. The largest three operators (AMC Entertainment, Inc. ("AMC"), Regal and Cinemark Holdings, Inc. ("Cinemark")) hold a combined market share of approximately 50 per cent. of total screens.

Within the United States, Regal has a geographically diverse cinema estate, which includes cinemas in 48 of the top 50 US designated market areas,^([10]) including dense population hubs and affluent areas such as California, Florida and New York. Regal operates multi-screen cinemas and, as at 30 September 2017, had an average of 13.0 screens per location, which is well above the North American motion picture exhibition industry average of 7 screens per location. Regal has rolled out recliner seats to approximately 27 per cent. of its sites, providing cinemagoers with a premium experience. The costs of conversion of seating in some cases are partially covered by investments from Regal's cinema landlords. The majority of sites are under lease agreements generally ranging from 15 to 20 years.

Creation of a Leading Global Cinema Group

Following Completion, the Enlarged Group will become a global cinema operator of scale, with operations in ten countries covering an addressable market of approximately 500 million people.

For the twelve month period ending 30 June 2017, the Enlarged Group would have had over 310 million annual admissions, pro forma revenues of US$4,370 million (£3,243 million) and pro forma EBITDA of US$907 million (£673 million). The Enlarged Group will have 9,542^([11]) screens across the United States and Europe, making it the second largest operator in the world (by number of screens).

The Cineworld Board expects that the Enlarged Group's diverse geographic footprint will help to mitigate year-on-year volatility in the global cinema industry resulting from regional, economic, weather and movie performance variables and enable the Enlarged Group to diversify its movie offering.

The Cineworld Board believes that the Enlarged Group will continue to generate strong total returns for shareholders through top-line growth, delivery of operational improvements and dividends.

At present, Regal operates solely in the United States, unlike the other two major US market participants, AMC and Cinemark, who have overseas operations. Cineworld sees significant potential for value creation in making the Enlarged Group a global cinema operator of scale on both sides of the Atlantic and sharing best practices.

Delivering Attractive Shareholder Returns for the Enlarged Group

The Cineworld Board believes that the Cineworld management team can create significant value and returns in the Enlarged Group by improving the customer experience in the United States, which is expected to result in attendance and yield growth. Cineworld intends to apply its successful practices of cutting edge cinema settings, technologies, innovation, loyalty programmes and other business initiatives to Regal.

The Cineworld Board believes that the Enlarged Group will be able to accrue considerable additional benefits from the sharing of best practices between Cineworld and Regal. Examples of such best practice include enhancing the customer's experience through venue refurbishments and better seating, diversifying multiplex offering using latest technology, loyalty programmes, accretive bolt-on acquisitions and adopting a highly disciplined approach to costs.

The Cineworld Board estimates that, following Completion, the Enlarged Group will be able to achieve annualised pre-tax combination benefits of US$100 million (excluding one-off implementation costs), consisting of:

-       Approximately US$60 million from cost reduction including the elimination of duplicative corporate costs, public company expenses and functional overheads, the optimisation of functions and economies of scale; and

-       Approximately US$40 million in benefits from business initiatives and implementing best practices across sales and marketing, customer experience and other income.

The Cineworld Board also estimates US$50 million of group structuring benefits impacting cash flows and earnings through the adoption of an efficient financial structure.

The combination benefits identified reflect both additional benefits and possible cost reductions which are contingent on Completion and could not be achieved independently.

The Cineworld Board expects that these combination benefits will be equally phased in FY 2018 and FY 2019 while the group structuring benefits are expected to be fully realised by FY 2018. The Cineworld Board expects to incur up to 1x cost reduction (US$60 million) in FY 2018 to achieve the benefits.

Leveraging Cineworld management's experience and track record

The Cineworld CEO, Mooky Greidinger, and Deputy CEO, Israel Greidinger, will retain their managerial positions and lead the integration and growth of the Enlarged Group after Completion. Having been in the cinema business for three generations, the Greidinger family has significant experience and a track record of acquisitions as well as operating, refurbishing and driving shareholder returns in cinema businesses. Specifically, the Cineworld Board believes the Cineworld CEO and Deputy CEO have the skill and experience to continue to drive Cineworld's international expansion by means of organic growth and acquisition, as demonstrated by their success in integrating the Cineworld and Cinema City businesses internationally across eight markets.^([12])

The Cineworld management team has a strong track record of delivering significant returns to shareholders following the Cinema City Combination. EBITDA has grown by a CAGR of approximately 10.2 per cent. with a 203bps increase in EBITDA margin from FY 2013^([13]) to FY 2016. Since the Cinema City Combination, Cineworld has delivered total shareholder returns of 100 per cent., of which 86 per cent. is share price appreciation, between 10 January 2014 and 27 November 2017. The Cineworld management team also grew the Cineworld revenue by a CAGR of 6.7 per cent. between FY 2013^([14]) and FY 2016, while reducing leverage from 2.3x net debt/EBITDA as at 30 June 2014 to 1.6x net debt/EBITDA as at 31 December 2016.([15])

Attractive financial returns

The Cineworld Board believes that the Transaction will be financially beneficial to Cineworld shareholders. The Transaction is expected to be strongly accretive to earnings in the first full year following Completion. Furthermore, Cineworld's return on invested capital associated with the Acquisition is expected to meet its cost of capital in the first full year after Completion (FY 2019).

The Cineworld Board expects that Cineworld will be able to maintain its existing dividend policy following Completion, underpinned by the future prospects of the Enlarged Group.

In light of the scale of the Acquisition, the Cineworld Board believes that the financing structure for the Acquisition is appropriate and will continue to provide attractive shareholder returns and future flexibility alongside a clear deleveraging profile supported by the strong cash generation of the Enlarged Group. If Completion were to occur at the end of FY 2017, it is expected that the leverage ratio would be approximately 4.0x net debt/EBITDA (if full annualised pre-tax combination benefits of US$100 million were taken into account in calculating that EBITDA).^([16])

Since the Cinema City Combination, Cineworld has significantly reduced its leverage ratio while also continuing to invest and grow its annual dividend. Consequently, the Cineworld Board is confident in its ability to grow dividends and reduce leverage.

The Cineworld Board expects that the increased interest expenses which will result from the higher leverage following Completion should, together with other factors, lead to group structuring benefits of approximately US$50 million on a recurring basis from the first full year following Completion.

The Cineworld Board's expectations regarding these financial effects are based upon the realisation of combination benefits and reduction in tax expenses on the basis described above and do not take into account any exceptional restructuring costs.([17]⁾

3.             Summary Information on Cineworld

Cineworld was founded in 1995 and is now one of the leading cinema operators in Europe. Cineworld listed on the London Stock Exchange in May 2007 and is currently the UK's only quoted cinema business.

In 2014, Cineworld combined with Cinema City (the predecessor to which was started by the Greidinger family in 1929) to create the second largest cinema business in Europe (by number of screens). Immediately following completion of the Cinema City Combination, Cineworld had 201 sites and 1,852 fully digital screens.

Today, Cineworld is an international cinema operator operating in nine different countries with 232 sites and 2,227 screens (as at 29 November 2017). Cineworld operates in the UK and Ireland under the Cineworld and Picturehouse brands, in six Central and Eastern European countries under the Cinema City brand and in Israel under the Yes Planet and Rav-Chen brands.

Cineworld is one of the UK's leading cinema operators by admissions and box office revenues. Cineworld's cinemas are modern, well-designed multiplexes offering great customer service with high quality technology, stadium seating, and online ticketing services. Cineworld also operates in the UK via Picturehouse, its arthouse cinema brand which has a cosier atmosphere. Picturehouse offers freshly-cooked food, bars and special events, which provides an alternative experience to the multiplexes.

In FY 2016, Cineworld had over 100 million admissions across its cinemas and generated revenues of £798 million and EBITDA of £176 million.

4.             Summary Information on Regal

Regal is a corporation organised on 6 March 2002 under the laws of the State of Delaware and its common stock trades on the New York Stock Exchange. Regal operates one of the leading and most geographically diverse cinema estates in the United States, consisting of 7,315 screens in 561 cinemas in 43 states along with Guam, Saipan, American Samoa and the District of Columbia as at 30 September 2017.

Regal has a geographically diverse estate which includes cinemas in 48 of the top 50 US designated market areas. Regal operates multi-screen cinemas and, as of 30 September 2017, had an average of 13.0 screens per location, which is well above the North American motion picture exhibition industry average. Regal operates, develops and acquires multi-screen cinemas primarily in mid-sized cities and suburban areas of larger cities throughout the United States.

Regal operates its cinema estate using its Regal Cinemas, United Artists, Edwards, Great Escape Theatres and Hollywood Theatres brands through its wholly-owned subsidiaries. Regal's multi-screen cinema complexes typically contain 10 to 18 screens, each with auditoriums ranging from 100 to 500 seats. Regal's cinemas feature amenities, such as immersive sound, wall-to-wall and floor-to-ceiling screens, Sony Digital Cinema 4K projection systems, three-dimensional (3D) digital projection systems, IMAX and its large screen format, RPX, digital stereo surround-sound and interiors featuring video game and party room areas adjacent to the cinema lobby. Regal is currently implementing various other initiatives and customer amenities such as luxury reclining seating, an array of food and beverage offerings, in-cinema dining and bar service and reserved seating.

Regal owns approximately 17.9 per cent.^([18]) of National CineMedia, LLC ("NCM"). NCM operates the largest digital in-cinema advertising network in North America representing over 20,500 US cinema screens and focuses on in-cinema advertising for its theatrical exhibition partners, which include Regal, AMC and Cinemark. NCM is a joint venture between Regal, AMC and Cinemark.

Regal holds a 46.7 per cent.^([19]) economic interest in Digital Cinema Implementation Partners ("DCIP"), a joint venture company formed by Regal, AMC and Cinemark. DCIP funds the cost of digital projection principally through the collection of virtual print fees from motion picture studios and equipment lease payments from participating exhibitors including Regal. In addition to its US digital deployment, DCIP actively manages the deployment of over 1,800 digital systems in Canada for Canadian Digital Cinema Partnership, a joint venture between Cineplex and Empire Theatres Limited.

In FY 2016, Regal had approximately 211 million admissions and generated total revenues of US$3,197 million (£2,373 million) and Adjusted EBITDA of US$630 million (£468 million).

5.             Summary of the key terms of the Acquisition

Merger Agreement

On 5 December 2017, Cineworld and Regal entered into an agreement and plan of merger (the "Merger Agreement"), under which Cineworld has agreed to acquire, for cash, the entire issued and to be issued share capital of Regal on the terms and conditions of the Merger Agreement.  The Acquisition will be implemented by way of a merger in accordance with the laws of the State of Delaware at a price of US$23.00 per Regal share, which values the entire issued and to be issued share capital of Regal at US$3.6 billion (£2.7 billion), with an implied enterprise value of US$5.8 billion (£4.3 billion). Following Completion, Regal will be a wholly owned indirect subsidiary of Cineworld.

Shareholder approvals

Due to its size, the Acquisition is a reverse takeover under the Listing Rules. As such, Cineworld will need to seek the approval of its shareholders for the Acquisition at the General Meeting at which Cineworld shareholders will be asked to vote in favour of the Resolutions.

The Cineworld Directors intend to recommend that Cineworld shareholders vote in favour of the Resolutions in the Combined Prospectus and Circular, as the Cineworld Directors intend to do in relation to their beneficial holdings, which amount to approximately 0.9 per cent. of Cineworld's existing issued ordinary share capital as at the date of this announcement.^([20]) The Major Shareholder has agreed to vote in favour of the Resolutions in relation to its holding, which amounts to approximately 28 per cent. of Cineworld's existing issued ordinary share capital as at the date of this announcement. The trustee of trusts of which Anthony Bloom, Chairman of the Cineworld Board, is a potential discretionary beneficiary, has undertaken that the votes attaching to the Ordinary Shares held by such trusts and which amount to approximately 0.8 per cent. of Cineworld's existing issued ordinary share capital as at the date of this announcement, will be voted in favour of the Resolutions.

The Anschutz Corporation, which holds shares representing approximately 67 per cent. of the voting power in Regal, has agreed to provide its written consent to approve the Acquisition, with effect upon approval of the Transaction by Cineworld shareholders and satisfaction of the conditions set forth in a voting and support agreement with Cineworld. Delivery of written consent from The Anschutz Corporation is the only Regal stockholder action required to approve the Acquisition.

Conditions

Completion of the Acquisition is conditional upon certain things, including:

(a)           the approval of the Resolutions by Cineworld shareholders at the General Meeting;

(b)           the approval of the Merger Agreement by Regal stockholders, by delivery of the written consent by The Anschutz Corporation or, if the written consent is not delivered, at a meeting of Regal stockholders;

(c)           the expiry or early termination of any applicable waiting period (and any extension of such period) applicable to the Acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;

(d)           the admission of Cineworld's new ordinary shares to be issued pursuant to the Rights Issue to the premium listing segment of the Official List and to trading, nil paid, on the main market for listed securities of the London Stock Exchange; and

(e)           no material adverse effect having occurred in respect of Regal.

Termination fees

Cineworld

Cineworld has agreed to pay a fee of US$20,150,963 to Regal if the Merger Agreement is terminated in certain circumstances, including where the Cineworld Board withdraws its recommendation of the Transaction, Cineworld shareholders do not approve the Transaction, the Rights Issue or the debt financing do not proceed as planned or a material breach of the Merger Agreement by Cineworld (the "Cineworld Termination Fee).

The Major Shareholder

In addition to any payment of the Cineworld Termination Fee, the Major Shareholder has agreed to pay a fee of US$75,000,000 to Regal if the Merger Agreement is terminated in certain circumstances involving both an acquisition proposal for Cineworld and any of the following: the Cineworld Board withdraws its recommendation of the Transaction, a material breach of the Merger Agreement, Cineworld shareholders do not approve the Transaction or Completion has not occurred by 5 June 2018.  The Major Shareholder has also agreed to pay a fee of US$4,849,037 to Regal if the Merger Agreement is terminated in certain circumstances, including where Cineworld shareholders do not approve the Transaction or the Rights Issue or the debt financing do not proceed as planned. Cineworld has no liability to Regal, the Major Shareholder or any third party in connection with the Major Shareholder Fee.

Regal

Regal has agreed to pay a fee of US$95,150,963 to the Company if the Merger Agreement is terminated in certain circumstances, including where the Regal board withdraws its recommendation that Regal stockholders approve the Acquisition, or the Regal board terminates the Merger Agreement to enter into an alternative acquisition proposal that the Regal board determines to be superior to the Acquisition, provided that the fee payable by Regal to Cineworld under these circumstances will be US$36,270,000 if the alternative acquisition proposal was received on or before 22 January 2018.

Regal has also agreed to pay a termination fee of US$20,150,963 to the Company if the Merger Agreement is terminated following a material breach of the Merger Agreement by Regal or where Regal stockholders do not approve the Acquisition.  Further, an additional termination fee of US$75,000,000 will be payable by Regal where the Merger Agreement is terminated in certain circumstances involving both an alternative acquisition proposal for Regal received after 22 January 2018 and any of the following: Regal has materially breached the Merger Agreement, Regal stockholders have not approved the Acquisition or Completion has not occurred by 5 June 2018 (provided that, if such additional fee is paid in connection with the failure of Completion to occur by 5 June 2018, it shall not be accompanied by any other fee).

6.             Financing the Acquisition

The Acquisition will be funded through:

·      c. £1.7 billion (c.US$2.3 billion) from the proceeds of the Rights Issue;

·      c. US$4.0 billion (c.£3.0 billion) from the Debt Facilities; and

·      existing cash on balance sheet.

With respect to the Rights Issue, which is expected to raise approximately £1.7 billion (c.$ 2.3 billion) of gross proceeds, Cineworld has entered into a full underwriting agreement with Barclays, HSBC and Investec (the "Underwriting Agreement"). The Underwriting Agreement envisages a volume underwriting under which the number of new ordinary shares in the capital of Cineworld to be issued will be set by reference to an issue price to be agreed by Cineworld, Barclays, HSBC and Investec prior to publication of the Combined Circular and Prospectus. If the parties cannot agree, the appropriate number of shares will be issued at nominal value in order to achieve the desired fundraising amount. The Underwriting Agreement contains customary representations and warranties, undertakings, conditions and termination rights.

In addition to the co-investment from a sovereign wealth fund, the Major Shareholder is extending its existing secured financing facility to take up in full its pro rata entitlement under the Rights Issue.

Cineworld entered into an agreement with Barclays and HSBC (the "Commitment Parties") on 5 December 2017 pursuant to which the Commitment Parties have committed to make the Debt Facilities available to one or more members of the Enlarged Group on or around Completion. The Debt Facilities will be constituted by (a) a c.US$4.0 billion senior secured term loan facility (the "Term Facility") and (b) a c.US$300 million senior secured revolving credit facility (the "RCF"). The proceeds of loans under the Term Facility may be used to (i) part finance the consideration for the Acquisition, (ii) finance certain fees, premiums, expenses and other transaction costs incurred by members of the Cineworld Group in connection with the Acquisition and (iii) refinance certain external financial indebtedness of Cineworld and Regal. The proceeds of loans under the RCF may be used for working capital, capital expenditures and general corporate purposes.

Cineworld is entering into a contingent foreign exchange forward transaction (the "Trade") with Barclays, pursuant to which Cineworld will exchange, as required, a certain amount of pound sterling (at a rate to be determined according to the settlement date of the Trade) into a fixed amount of US dollars in order to match the currency requirements of the consideration for the Acquisition.

7.             Dividends

For FY 2016, Cineworld paid a dividend of 19.0 pence per share (2015: 17.5 pence per share), representing a 8.6 per cent. increase on the level in 2015. For the six month period ended 30 June 2017, Cineworld has paid an interim dividend of 6.0 pence per share (2016: 5.2 pence per share), representing a 15.4 per cent. increase on the 2016 payment.

The Cineworld Board understands the importance of dividend payments to shareholders and, reflecting the confidence that the Cineworld Board has in the benefits of the Acquisition and the cash generative potential of the Enlarged Group, it is intended that, following Completion, Cineworld will maintain its existing dividend policy, underpinned by the future prospects of the Enlarged Group. The Cineworld Board therefore intends, consistent with that policy, to declare or recommend a per share dividend at a coverage ratio similar to that paid in the last three financial years, to the extent that the Company has distributable reserves and cash available for this purpose.

8.             Expected Timetable to Completion

The Combined Circular and Prospectus containing further details on the Transaction, the Cineworld Board's recommendation, the terms of the Rights Issue, the notice of the General Meeting and the Resolutions is expected to be sent to Cineworld shareholders (other than Cineworld shareholders with a registered address in certain excluded jurisdictions) in January 2018. Subject to satisfaction of the conditions to the Acquisition, Completion is expected to occur during the first quarter of 2018.

Cineworld will also issue its customary January trading update at or around the same time as the Combined Circular and Prospectus is published.

Appendix

Definitions, sources of information and bases of calculation

1.     Where amounts are shown in both US dollars and sterling, or converted between the aforementioned currencies, in this announcement, an exchange rate of £1.00/US$1.3474 has been used, which has been derived from data provided by Bloomberg on 4 December 2017.

2.     The enterprise value multiples are based on the consensus of five brokers EBITDA forecasts for Regal, including US$100 million run-rate combination benefits set out at paragraph 2 of this announcement.

3.     2017E EBITDA for the Enlarged Group, as used in this announcement, is based on consensus of eight brokers for Cineworld and five brokers for Regal, including US$100 million run-rate combination benefits set out at paragraph 2 of this announcement.

4.     EBITDA, as used in this announcement, represents operating profit before depreciation, impairments, reversals of impairments and  amortisation, onerous lease and other non-recurring or non-cash property charges, transaction, pension, refinancing and reorganisation costs. 

5.     Regal Adjusted EBITDA, as used in this announcement, represents net income attributable to controlling interest adjusted for interest expense, net, provision for income taxes, depreciation and amortization, net (gain) loss on disposal and impairment of operating assets and other, share-based compensation expense, loss on extinguishment of debt, earnings recognized from NCM, cash distributions from NCM, cash distributions from other non-consolidated entities, noncontrolling interest, net of tax and equity in income of non-consolidated entities and other, net.

IMPORTANT NOTICE

The contents of this announcement have been prepared by and are the sole responsibility of Cineworld.

This announcement is not a prospectus but an advertisement and investors should not acquire any securities referred to in this announcement except on the basis of the information contained in the Combined Circular and Prospectus when published. The information contained in this announcement is for background purposes only and does not purport to be full or complete.  No reliance may be placed by any person for any purpose on the information contained in this announcement or its accuracy, fairness or completeness.

A copy of the Combined Circular and Prospectus when published will be available from the registered office of Cineworld and on Cineworld's website at www.cineworldplc.com provided that the Combined Circular and Prospectus will not, subject to certain exceptions, be available to shareholders in certain excluded jurisdictions. Neither the content of Cineworld's website nor any website accessible by hyperlinks on Cineworld's website is incorporated in, or forms part of, this announcement.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States.  The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction.  Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy, securities to any person in the United States, Australia, Canada, Japan, Hong Kong or in any jurisdiction to whom or in which such offer or solicitation is unlawful.  The securities referred to herein may not be offered or sold in the United States unless registered under the US Securities Act of 1933 (the "Securities Act") or offered in a transaction exempt from, or not subject to, the registration requirements of the Securities Act.  The offer and sale of securities referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada, Japan or Hong Kong.  Subject to certain exceptions, the securities referred to herein may not be offered or sold in Australia, Canada, Japan or Hong Kong or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan or Hong Kong.  There will be no public offer of the securities in the United States, Australia, Canada, Japan or Hong Kong.

No statement in this announcement is intended as a profit forecast and no statement in this announcement should be interpreted to mean that (i) the future earnings per share, profits, margins or cash flows of the Enlarged Group will necessarily match or be greater than the historical published earnings per share, profits, margins or cash flows of the Cineworld Group; or (ii) that Cineworld endorses the broker consensus referred to herein.

This announcement does not constitute a recommendation concerning the Rights Issue. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

Each of Barclays Bank PLC, acting through its Investment Bank ("Barclays"), HSBC Bank plc ("HSBC") and Investec Bank plc ("Investec" and together with Barclays and HSBC, the "Underwriters") is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority. Each of the Underwriters is acting exclusively for Cineworld and no one else in connection with the Transaction or any other matter referred to in this announcement and will not be responsible to anyone other than Cineworld for providing the protections afforded to their respective clients nor for providing advice in relation to the Transaction or any other matter referred to in this announcement. Neither the Underwriters nor any of their respective subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of the Underwriters in connection with this announcement, any statements contained herein or otherwise.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements".  These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions.  Forward-looking statements may and often do differ materially from actual results.  Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth, strategies, integration of the business organisations and achievement of anticipated combination benefits in a timely manner.  Forward-looking statements speak only as of the date they are made.

Such forward-looking statements are based on beliefs, expectations and assumptions of the Cineworld Board and other members of senior management regarding Cineworld's present and future business strategies, the timetable for integration of Regal, the benefits to be derived from the Acquisition and the environment in which Cineworld, Regal and/or, following Completion, the Enlarged Group will operate in the future. Although the Cineworld Board and other members of senior management believe that these beliefs and assumptions are reasonable, by their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Cineworld Group's control. Cineworld, Regal and/or, following Completion, the Enlarged Group's actual operating results, financial condition, dividend policy and the development of the industry in which they operate, as well as the benefits and combination benefits actually received, may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the operating results, financial condition and dividend policy of Cineworld, Regal and/or, following Completion, the Enlarged Group, and the development of the industry in which they operate, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, changes in political and economic stability and changes in business strategy or development plans, difficulties encountered in integrating the two organizations and/or achieving the anticipated combination benefits in a timely manner and other risks.

You are advised to read this announcement and the Combined Circular and Prospectus (if and when published) in their entirety for a further discussion of the factors that could affect Cineworld and/or the Enlarged Group's future performance. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

Each of Cineworld, the Underwriters and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward looking statement contained in this announcement whether as a result of new information, future developments or otherwise.

The person responsible for this announcement is Fiona Smith, Company Secretary of Cineworld.