What's going on?

Britain�s Cineworld agreed on Tuesday to buy out its American rival Regal Entertainment � a $5.8 billion deal that will create the world�s second-biggest cinema operator.

What does this mean?

Regal is the second-largest movie theater operator in the US, managing more than 7,000 movie screens; Cineworld is the second-largest player in Europe, with over 2,000 screens of its own. Cineworld�s CEO says that he wants to boost Regal�s profit margins through cost savings and perhaps higher ticket prices (great, right?) � and he expects the montage to lead to blockbuster profits by 2019.

Why should I care?

The bigger (motion) picture: Cinema operators are reeling from consumers� shift to digital.

Movie theaters have been experiencing Vertigo as consumers have flocked like The Birds towards digital streaming over Notoriously expensive movie tickets (apologies to Alfred Hitchcock). Cross-border mergers are a way for cinemas to protect their business by avoiding over-exposure to volatility in some markets (like the UK, Cineworld�s main market, where consumer spending has dropped of late). Cineworld�s deal follows recent cross-border acquisitions by America�s AMC (itself owned by China�s Dalian Wanda Group) of European chains like Odeon and UCI Theatres.

For markets: The wisdom of the deal isn�t without a Shadow of a Doubt (okay, enough Hitchcock).

Some analysts have warned that Cineworld might be getting in over its head by shelling out $3.6 billion in cash for Regal, part of which the company will have to borrow. On top of that, there�s a worry that American cinemas won�t fare as well as Cineworld�s CEO seems to think: annual box office revenues in the US are expected to have declined 2% this year, in spite of big-name releases like Wonder Woman and Blade Runner 2049. Skeptical investors sent Cineworld shares down on the news of its big-ticket merger; they likely view the deal as high risk, given the price Cineworld is paying (AMC is facing similar investor skepticism over its own acquisitions).