Large format theatre provider Iwerks Entertainment is to merge with simulation technology company SimEx in a strategic move which will consolidate interests in an increasingly difficult marketplace.

Subject to shareholder approval, the agreement will see Toronto-based SimEx acquiring Iwerks in exchange for around $0.63 per share of Iwerks common stock. Shares in California-based Iwerks, which has nearly 200 installations in 38 countries, were today trading at $0.56.

The merger, which will create a combined worldwide network of over 120 simulation theatres and 250 large format theatres, will see Iwerks retaining its brand name, identity and existing management team.

"The SimEx/Iwerks company will provide market breadth to the industry," said Michael Needham, CEO of SimEx. "The combined companies will benefit from greater cost efficiencies allowing us to meet the changing needs of our clients through the development of dynamic new products and services."

Don Iwerks, chairman of Iwerks Entertainment said: "The Iwerks film production and distribution teams will work closely with SimEx Digital Studios to accelerate the production of new film content for our combined network of theatres."

Large format operators are increasingly vulnerable as the US exhibition sector undergoes seismic financial difficulties. Iwerks' rival IMAX recently posted disastrous mid-year results, with an approximate 40% drop in theatre systems sales revenues.