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I agree Hosai.
Whilst 2/3 weeks would be OK without big movies - it wouldn’t make sense to have had cinemas open for the past 2/3 months!
There would have been no big new movies while cineplex is open though...cineworld could have opened today in the UK if they wanted but have delayed till the 30th waiting on the US.
Deal terms specifically excluded pandemic as a reason to cancel. Cineplex is probably on firmer ground financially in my opinion as the relative valuations show. They also have businesses that never had to shut down and have continued to generate cash flow during covid. The problem with cine is lack of transparency. The board consists of family and friends, so Mook doesn't get many hard questions. Their financials are 8mpenetrable by design. The USA is now where the bulk of cine's business is, it's not looking good for opening any time soon. Canada has fewer cases than Illinois and getting only a couple hundred new per day and dropping.
I think you make a good point there about Cineplex wanting quick action. It's in noones interests to go to the courts and neither party can be sure how it will play out. Cineworld need a response asap as you suggest.
I remember the RNS stating that Cine would 'retaliate' with their own lawsuit of some description, shouldn't be long now that the first move has been made (as expected but not at such a high value) that Cine will push a pawn forward.
The 2 point whatever Billion Plex are asking for damages inc Shareholder losses etc is higher than purchasing Plex outright. That alone tells me Plex are flexible and would settle for a purchase out of court, in a round about way. They an't surely expect Cine to pay that over just buying them out.
Completely agree. Courts no thank you, too many complex angles when you read into the law further. Who has the better Lawyers? But I can't see Plex backing away either so out of court settlement, surely. It won't be until more stability returns I imagine, these things usually don't move along quickly from past experience (years not months) particularly in today's environment when you can't get everyone in the same room.
However, I would hazard a guess in 2021 but can also see Plex pushing for a resolution sooner, they're in a terrible spot. Even if accepting a lower value to avoid court themselves. Less is better than £0.
Maybe Cine realise they f*d up and their argument of MAE won't win on the basis of precedence, and take the deal sooner. Who knows. I hope they have a smoking gun up their sleeve. We need to hear it ASAP!
Still don't understand why Cine wouldn't wait and delay delay delay for the drop dead date to then walk away. Covid is the perfect excuse to not close on date.
I would hope not Hosai but we cannot be sure. Hopefully there will be some people on this page who have good knowledge of litigation. My guess without legal knowledge too that they may have to come to some agreed settlement. The legal action was always coming, they said as much so how much of that uncertainty is factored into the current price already I'm not sure.
Whilst I have zero legal knowledge it would surprise me if cineworld had taken this action believing that the inevitable legal action could risk resulting in a overall net loss...let alone paying the amount cineplex are claiming.
Good thoughtful post there Haich, thanks. I guess it was inevitable that cineplex would launch action as they had said. I'm not sure it is in either sides interest for it to be dragged through the courts? If they reach a settlement how long do you think that might take?
Sorry, was response to NoFear. Unfortunately ironic handle given what is now in situ..
@MarkyMark "I don't believe that Cineworld would be that stupid to risk having to be sued by pulling out".
We all hope so, but with Cineworld's position & reasoning unclear we can't see the other side of the argument just yet, I do hope it's strong.
Unfortunately, Cineplex's entire lawsuit comes down to the significant 'carve-out' included to define the MAE's, that essentially even if there is a materially adverse effect before close of the deal, Covid-19 cannot be used as a reason for termination of acquisition.
Hence Cineworld say the reason isn't Covid, it's "something else".
Either way, getting out of a deal through exercising a MAE are unfavourably looked upon by Court. Generally they rarely win for the buyer I understand.
What could the 'something else' be for Cineworld?
MAE's also often have a 'disproportionate clause' in which the MAE and its carve-outs can be overridden if the target business is disproportionately impacted compared to others in the same sector. I don't think Cine could win on this basis.
There is also a 'Drop Dead Date' whereby for whatever reason an acquisition doesn't complete by a certain date after the close date, then both parties have the right to terminate without any further consequence. Usually weeks or months after the close date,. WHY DID CINE NOT DELAY AND WAIT FOR THIS DATE INSTEAD OF PULLING! Perhaps they strongly believe they have a non-MAE argument?
Perhaps Cineplex is unable to comply with it's pre-closing covenants, workforce, capital requirements etc. This would be better then targeting a MAE fault, as mentioned I understand they are very rarely agreed with in court. Particularly one which specifically carves out Covid from the equation.
This is going to get VERY messy.
So let's look at the basics. Cineplex, want to sell to Cineworld. Cineworld, want to buy Cineplex just at a knockdown price. If push comes to shove and Cine's position doesn't look as strong as anticipated they would settle out of court and purchase Cineplex for a lesser valuation (I hope)
If this goes to court, it could be a long drawn out battle, so many angles, ultimately I feel if Cineworld claim MAE, it won't be favourable, they need to focus on broken covenants as Cineplex have them bent over with that 1 sentence carved out.
More reading to do, we need a lawyer. And we need Cineworld's response asap else short term, with the US and now this, it could turn into a bloodbath until it's received.
I strongly believe that Cineworld will have the upperhand for the material adverse effects and breaches by the Toronto-based company Cineplex. I don't believe that Cineworld would be that stupid to risk having to be sued by pulling out due a Cineplex quoted “a case of buyer’s remorse” on the part of the U.K. company in the middle of a pandemic. Cineworld will hit them so hard with their legal defense team that they will end paying out £Millions to Cineworld for bringing on the legal suit
Check the news...
Stop talking Bolox
2.1bln is what cineplex want I think I have lost my sink.
#we are all fcuked