MUMBAI: Anil Ambani led Reliance MediaWorks Ltd. (RMW) and Carnival Cinemas today announced the signing of definitive agreements for the sale of the former’s multiplexes business to Carnival Cinemas Ltd in the largest ever deal in the sector in India till date.Ending months of negotiations, Carnival – backed by a Mumbai based agro trading company – on Monday said it will acquire Ambani’s Big Cinemas for an enterprise valuation of a little over Rs 700 crores inclusive of its debt, a move that will further enhance consolidation in the space which has already seen three similar transactions in the last 1 year alone.ET in its December 10th edition broke the news of the imminent deal.With the addition of Big's 242 screens, the transaction will catapult Carnival to be amongst the top 3 film exhibition companies with over 300 screens nationwide thereby increasing its bargaining power with film producers and distributors for a larger share of the box office receipts.Operating under the ‘Carnival Cinemas’ brand, the company currently has over 50 operational screens while 75 screens are to come on stream in the next two months taking the total portfolio to 125 screens. By the end this fiscal, the plan is to reach 400 plus screens. Its current footprint spans across Kerala, Karnataka, Tamil Nadu, Maharashtra, Madhya Pradesh, Uttar Prardesh and West Bengal. "We are targeting to achieve 1,000 screens by the year 2017. Carnival will not only make their presence in Tier I but would lay emphasis for strong presence across tier II & III cities. We want to make Cinemas synonymous to Carnival,” said Shrikant Bhasi, Chairman, Carnival Group.India currently has 1700 multiplex screens with PVR in pole position with 454 screens, followed by Inox at 361 screens. According to a 2013 industry report by KPMG and Federation of Indian Chambers of Commerce and Industry (Ficci), multiplexes account for only eight percent of India’s screens. But they rake in a third of the Indian box-office. Scaling up is also becoming critical for operators as economic slowdown had stalled the pace of new screens. In July, Carnival had acquired HDIL's multiplex chain Broadway Cinemas for around Rs 110 crore while just earlier this month, Mexican chain Cinepolis bought 83 screens of Fun Cinemas for Rs 408 crore.“From a small 40 screen player just a year back, Carnival straight away breaks into the 3rd spot. And through organic and inorganic growth, they are looking at close to 450 screens soon. In a sector that it still nascent, Carnival clearly is becoming a very meaningful player,” said KV Ramanand, Partner, Corporate Finance at KPMG, the buy-side advisor in this transaction. "This is a landmark deal for consolidation in the exhibition sector which is now a 3-4 player game, on a pan India business. Since Big Cinema was very strong in the North and West it gives Carnival, which is already strong in the South, an all India presence, " adds Ajay Shah, Partner, EY, Transaction Advisory Services . EY have advised Reliance on the deal.The company is planning to part fund the acquisition through internal accruals of the group while the rest will be brought in by Bhasi as part of promoter funding. Additional debt may be raised in future for refurbishments and brand expansion. The initial cash outgo will be quite small. Sources say, of the Rs 710 crore enterprise value, close to Rs 450 crore is the debt of Big Cinemas. The remaining Rs 260 crore is the equity value.Carnival Films is part of the diversified Asian Business Connection with interests in hospitality, commodity trading, movie production, distribution and international agri-trading which remains the group’s main stay. Group flagship Advantage Overseas Pvt. Ltd (AOPL), trades in agri-commodities such as soyameal, rapeseed, maize, castor seeds, wheat and wheat flour, rice, sugar and pulses.The proposed transaction is aligned with Reliance Capital's stated objective “of focusing purely on its core financial services businesses, while significantly reducing “exposure to non-core investments in the media and entertainment sector, and reducing overall debt," said Sam Ghosh, CEO, Reliance Capital.R-Cap is the promoter of RMW.In 2005, Reliance Capital had bought 51 per cent in Adlabs for about Rs 360 crore from Manmohan Shetty and Vasanji Mamania. While the later had cashed out entirely, Shetty stayed on for a year more and then exited and the entertainment and multiplex company was renamed Reliance MediaWorks.Big Cinemas has been looking for a suitor for almost a year now and has had talks with domestic peers PVR Ltd, Inox Leisure Ltd and a few PE global buyout funds like Providence, Navis Partners. Talks with Carnival picked up the last 3 months. “PVR and Inox would have gone way ahead if they concluded the deal forcing Carnival to act quickly as well as bid very aggressively,” said a source involved in the negotiations. “Moreover, there could have been some regulatory issues had the first two bought Big as well.”This deal excludes real estate owned by RMW at 4 properties worth approximately Rs 200 crores. These 4 including the flagship Imax Wadala involve 15 screens according to officials in the know. Carnival will run the assets in these locations paying Reliance Group a lease rental. These properties are expected to be further developed commercially and separately monetised for a higher value.Interestingly, post the sell off, Reliance Capital will retain an option to re-acquire a minority stake in Carnival Cinemas at an “appropriate discount,” in a potential pre-IPO placement, the quantum or timeline for which was not made public. The proposed transaction is expected to be close within the current financial year following all pending regulatory approvals. “Reliance still expects further upside in the business. So they would want to have some skin the game in future once the efficiency and profitability of the business improves,” added the source mentioned above.Earlier in July, Reliance MediaWorks merged its global film and media business with media and entertainment services provider Prime Focus Ltd and both partners infused Rs 120 crore each through preferential a allotment of shares into the combined entity.