Cineplex Fourth-Quarter Earnings Fall on Regal Owner Deal Costs

Scotiabank Theatre Toronto - Cineplex Entertainment - Publicity -H 2016
Courtesy of Cineplex Entertainment

Cineplex CEO Ellis Jacob told analysts the Cineworld acquisition will ensure the Canadian exhibitor is "part of the next era of global entertainment."

Canadian exhibition giant Cineplex on Wednesday posted lower fourth-quarter earnings as deal costs associated with its pending merger with Regal owner Cineworld weighed on its bottom line.

Cineplex posted $3.5 million in earnings, falling 87 percent from a profit of $27.2 million last year. The exhibitor reported $11.7 million in deal costs associated with Cineworld's friendly takeover and non-cash interest of $12.1 million from debt repayments required before completion of the deal.

Regal owner Cineworld in December unveiled a $2.8 billion deal to acquire Cineplex for $34 per share in cash. Cineplex CEO Ellis Jacob on an analyst call said the Cineworld deal will allow Cineplex to be "part of the next era of global entertainment."

Cineworld and Cineplex shareholders on Tuesday overwhelmingly approved the friendly takeover. Additional regulatory approvals are pending, and Jacob said he expected completion of the transaction to take place in either April or June.

The deal will create one of the world's largest exhibition companies with over 11,200 screens globally. Jacob told analysts that interest in Cineplex from rival companies emerged after Cineworld unveiled its takeover proposal, but no one was prepared to match the original $34 per-share offer.

On Wednesday, Cineplex also reported total revenues up 3.6 percent to $443.2 million. The exhibitor reported annual box office revenues of $181.7 million, a 0.3 percent decrease from 2018 as theater attendance fell just under 1 percent to 16.8 million patrons.

Cineplex saw its biggest box office during the last quarter from Joker, Frozen 2 and Star Wars: The Rise of Skywalker, compared with the year-earlier period when Dr. Seuss' The Grinch, A Star Is Born and Venom ruled its box office.

Cineplex operates 165 cinemas with 1,695 screens and dominates the Canadian theatrical market. Cineplex would join Cineworld's portfolio, which already includes such brands as Regal, Picturehouse and Cinema City.