Two of India’s top satellite-based cinema feed providers, UFO Moviez and Qube Cinema Technologies, have decided to merge to take advantage of higher scale.

The merger ratio and valuation will be 63.6% for UFO and 36.4% for Qube Digital.

Currently, UFO supplies its movie feeds to around 4,000 screens while Qube provides its feed to around 3,300 screens.

Qube is more focused on South India, while UFO Moviez is stronger outside the South.

Besides getting rental and commission from theater owners and film owners, the companies also make money by inserting their advertisements into the feeds.

“The merged business will therefore be able to offer a pan India in-cinema advertising network covering over 7,300 screens, significantly improving the overall value proposition for clients,” UFO Moviez said.

“Considering the existing entertainment and advertising market dynamics, the proposed merger of the two companies will lead to robust growth opportunities in India and globally,” it added. “The two companies also have complementary strengths in terms of client base, presenting attractive cross-sell opportunities.”

Though Qube uses the older MPEG-2 compression format, the company has been able to develop certain software and tools that are considered very advanced, such as an in-house server that conform digital cinema initiative or DCI.

Similarly, Qube has developed a self-service single-window content and digital rights management platform for movies called Qube Wire, which is in operation on a limited-scale at present.

The combined network, post-amalgamation, will allow faster monetization of Qube Wire and other IP based Qube products, especially as UFO Moviez has international operations, the companies said.

“Going forward, it is expected that the combined entity will develop and deploy both D-Cinema and e-Cinema systems that incorporate the best features of the multiple technologies available to the company and will thus be in a position to offer its clients viz: the film industry and advertisers a comprehensive bouquet of services,” UFO Moviez said.

The move would also save costs by unifying administrative functions, combining some infrastructural requirements and consolidating legal and regulatory compliances.

Qube’s business of providing technology solutions and services in the film, video and audio, including digital cinema advertising will be first demerged into Qube Digital — a subsidiary of Qube — and then subsequently merged with UFO.

This will also involve ICICI Venture and UFO purchasing a stake in Qube Digital from certain private equity investors who have been shareholders of Qube for several years.

Senthil Kumar, Co-founder of Qube Cinema Technologies Pvt. Ltd., said UFO’s reach and scale are a good combination for Qube’s strong technology focus. “With extraordinary reach and execution capabilities, we are bringing together two world-class organizations to deliver much more, thus maximizing value for all stakeholders.”

The deal will require nods from regulators.

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