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Economics Study Help

(edited 1 year ago)
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Original post by meli77

Can someone please mark this for me?
Examine two reasons why Cineworld plans to merge with CCI. (8)
Extract B
Cineworld merger with Cinema City International (CCI)
The UK’s biggest cinema chain by market share is to enter seven overseas markets
through a £900m merger. Cineworld announced that it has agreed to merge with CCI
which owns 100 multiplex cinemas in seven countries Bulgaria, Czech Republic, Hungary, Israel, Poland, Romania and Slovakia. The deal is expected to be promoted as a merger of equals although Cineworld is larger than its new partner. The planned merger with CCI 5 follows a fall of 1% in the revenue earned by cinemas in the UK and Ireland in 2013 to £1.17bn.
In 2013, Cineworld was ordered by competition regulators to sell three cinemas following
its takeover of the Picturehouse chain. This underlined the difficulty of finding new
growth opportunities in the company’s home market, which was one factor prompting a 10 search for international expansion opportunities.
Cineworld’s UK-based rivals have also grown overseas, with Odeon UCI having a presence in seven countries, while Canadian-owned Vue Entertainment has cinemas in Portugal, Taiwan, Germany and Denmark.
The combined group is to be run by CCI’s chief executive, although other senior 15 management will be drawn from the ranks of both companies and the board will have
more Cineworld board members.

My answer:
A merger is when two companies join together under common ownership.

1. It can grow into new markets. Through merging with, they can benefit from the “cinemas in seven countries” as they can operate within these countries. This in turn means that Cineworld will benefit from information synergy as well as the CCI’s large consumer base hence an increase in their amount of customers. Consequently, this would result into higher revenues and profits in the long-run.
2. Cineworld was ordered by competition regulators to “offload three cinemas following its takeover of the Picturehouse” chain. Subsequently, this justifies why Cineworld would like to merge as they are having difficulties of finding new growth opportunities in the company's home market and through merging they can acquire more market power and hence benefit from economies of scale.
3. However, one reason they may not merge is due to the magnitude of fall in cinema sales which is “1%”. This could suggest that they are just having a bad year and hence would not risk merging and consequently be scrutinised by competition market authorities.

needs more analysis

check these notes out= detailed analysis and evaluation

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