Canada's Cineplex Sues Regal Owner Cineworld Over Abandoned Takeover

Courtesy of Cineworld
Cineworld

Cineplex is seeking damages, arguing the firm "breached its contractual obligations" in abandoning a planned takeover, while Cineworld says it "intends to counter-claim."

As it continues a phased reopening, Canadian exhibitor Cineplex has started legal proceedings in the Ontario Superior Court of Justice against Regal owner Cineworld Group, "seeking damages after Cineworld wrongfully repudiated the transaction to acquire Cineplex."

On June 12, the U.K.-based cinema giant had called off its planned $2.1 billion takeover of Cineplex, which would have created one of the world's largest cinema companies with more than 11,200 screens globally.

Cineplex, as a once-friendly takeover attempt has hit the rocks, claimed that Cineworld "breached its contractual obligations and its duty of good faith and honesty." 

It is seeking damages, "including the approximately C$2.18 billion that Cineworld would have paid upon the closing of the arrangement for Cineplex's securities, reduced by the value of the Cineplex securities retained by its security holders, as well as compensation for other losses, including the failure of Cineworld to repay or refinance Cineplex's approximately C$664 million in debt and transaction expenses."

Cineworld reiterated its stance that it "did not breach these (or any) obligations or duties," saying it would "vigorously defend this claim." It also said that it believes that Cineplex's claim, if successful, "would be limited to its costs and expenses incurred in relation to the acquisition."

Cineworld said it terminated the deal "because Cineplex breached a number of its covenants" and "did not remedy these breaches when given the opportunity to do so." It said it was entitled "to recover from Cineplex all damages and losses that it has suffered as a result of Cineplex's breaches and the acquisition not proceeding, including its financing costs, advisory fees and other costs incurred." 

Concluded the company: "Cineworld intends to counter-claim against Cineplex for these damages and losses."

Cineplex's escalating legal battle comes as the exhibitor continues to reopen its Canadian circuit. On the weekend, the company had 30 of its 164 theaters across Canada operating. The phased reopening is taking place in seven Canadian provinces, including British Columbia, Saskatchewan, Quebec, New Brunswick, Nova Scotia and Newfoundland.

Ontario, Canada's biggest media market, has yet to allow the reopening of movie theaters amid the pandemic. Cineplex will reopen additional locations through July as it build toward the theatrical releases of major Hollywood tentpoles like Christopher Nolan's Tenet and Disney's Mulan.

Until then, Cineplex is looking to get Canadians back in the moviegoing habit with screenings of recent releases like Sony's Bloodshot and Universal Pictures' The Invisible Man. All Cineplex locations have reserved and staggered seating and strict hygiene measures.

Smaller Canadian chains Landmark Cinemas and Guzzo Cinemas have also begun to reopen their movie theaters countrywide ahead of Hollywood releasing new content into the local multiplex through the summer.