Cine appeal in full part 114 May 2022 22:28
NOTICE OF APPEAL
THE APPELLANTS, CINEWORLD GROUP PLC and 1232743 B.C. L.T.D APPEAL to the Court of Appeal from the Judgment of the Honourable Ms. Barbara A. Conway dated December 14, 2021 made at Toronto, Ontario.
THE APPELLANTS ASK THAT the Judgment be set aside, and Judgment be granted as follows:
1. Dismissing the Plaintiff/Defendant by Counterclaim, Cineplex Inc.’s (“Cineplex”), action;
2. Allowing the Defendants/Plaintiffs by Counterclaim, Cineworld Group plc’s and 123741 B.C. L.T.D.’s (collectively, “Cineworld”), counter-claim;
3. Costs of this appeal, and the trial below, be awarded to the Appellant;
4. Such further and other relief as the Appellants may request and this Honourable Court
deems just.
2
THE GROUNDS OF APPEAL are as follows:
Brief Background
5. In December 2019, Cineworld entered into an Arrangement Agreement with Cineplex, whereby Cineworld agreed to purchase from the shareholders of Cineplex their shares for a purchase price of $34 per share, a 42% premium to the then market price. The transaction was valued at approximately $2.8 billion. It was scheduled to close no later than June 30, 2020.
6. Among many interim operating covenants to which Cineplex agreed, Cineplex agreed to the Ordinary Course Covenant (at s. 4.1(1) of the Arrangement Agreement). Under this covenant Cineplex agreed that during the Interim Period (until closing) it would operate its business “in the ordinary course of normal day-to-day operations” and “consistent with past practice”.
7. In addition, the parties agreed to a condition precedent that relieved Cineworld from closing the transaction if, at the time of closing, Cineplex had a debt balance on its revolving credit facility in excess of $725 million (the $725M Debt Condition”).
8. Contrary to the Ordinary Course Covenant, Cineplex deviated markedly from its normal day-to-day operations and its past practice. In March 2020 Cineplex ceased paying suppliers and film studios on their ordinary payment cycle. Amounts that ordinarily would have been paid to suppliers, were then used to pay down its revolving credit facility to stay under the $725M Debt Condition. On April 1, 2020, Cineplex ceased paying any rent to its landlords. By June 30, 2020, the outside date for any closing, the overall impact of all of Cineplex’s deviations from the ordinary course exceeded $200 Million.
9. Accordingly, on June 12, 2020 Cineworld was entitled to and did terminate the Arrangement Agreement.
The Trial Judge’s Errors
10. By her reasons dated December 14, 2021, the Trial Judge, Justice Conway, found that Cineplex did not breach the Arrangement Agreement, and thus Cineworld did not have grounds
3
to terminate the Arrangement Agreement. She awarded Cineplex damages equal to lost synergies in the sum of CAD $1.2366 billion. She also dismissed Cineworld’s counterclaim.
Sign In
Follow the stocks
