Jupiter Asset Management, which owns 0.3 per cent of London-listed Cineworld, believes the business has gone beyond its remit with the proposed purchase of Regal which would involve a hefty new rights issue.
It has raised concerns that the chain would bite off more than it could chew by entering the US markets, which it sees as a massive unknown.
“We invested in a business that was growing nicely in the UK and Europe, investing in new locations, new products and refurbishing existing sites. There was an expectation that there were more bolt-ons or larger acquisitions in new European markets,” said Jupiter equities fund manager Alastair Gunn.
“Most shareholders would have been up for a £300m to £500m deal. We had options on mergers and acquisitions, buybacks, dividends and growth. This deal will completely change the balance sheet, and will fall on existing shareholders.”
In contrast to Gunn's negativity, analysts were generally supportive of the deal when it was announced last week.
“To strike now, when AMC (the US Number One and biggest global cinema operator) is suffering so much, is a brilliant move by Cineworld, in our view, as it reverses the tables and would push it into the challenger position in the world's largest cinema market,” said Canaccord Genuity's Nigel Parson.
Cineworld said it was in “advanced discussions” to complete the deal, and that any rights issue would have a “commitment to full subscription” from its largest shareholder Global City Holdings.