(Alliance News) - Canada's Cineplex Inc said Friday it plans to start legal proceedings against FTSE 250-listed Cineworld Group PLC after the UK cinema chain terminated its blockbuster merger.
London-based Cineworld said the CAD2.8 billion, about GBP1.6 billion, was dropped after "certain breaches" of the acquisition deal.
The takeover would have created North America's largest chain of movie theatres to better compete with AMC Entertainment. It would have added 165 cinemas to Cineworld's existing 786 sites and 9,500 screens. AMC Entertainment owns or operates about 1,000 theatres around the world.
Cineplex has a 75% box office market share in Canada.
But the coronavirus pandemic has closed theatres for months, and the continued appeal of cinemas is in doubt as major media companies are investing heavily in streaming services.
Toronto, Ontario-based Cineplex hit back on Friday saying it intends to commence legal proceedings promptly against Cineworld and seek damages for breach of contract.
In the termination notice, Cineworld alleged that Cineplex has taken actions that constitute breaches of Cineplex's covenants under the arrangement agreement between the two companies, including failing to operate its business in the ordinary course. In addition, Cineworld alleged that a "material adverse effect" has occurred with respect to Cineplex.
"The arrangement agreement explicitly excludes any 'outbreaks of illness or other acts of God' from the definition of material adverse effect and all of Cineworld's allegations stem from an outbreak of illness and act of God (Covid-19). Cineplex believes that Cineworld's allegations represent buyer's remorse, and are an attempt by Cineworld to avoid its obligations under the arrangement agreement in light of the Covid-19 pandemic," Cineplex said.
Cineworld shares were down 1.7% at 75.34 pence in London on Monday morning.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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