Cineplex (CGX) has won a legal challenge against Cineworld Group (CINE) over the British theatre giant’s aborted takeover of Canada’s largest movie theatre chain.
The Ontario Superior Court of Justice said the British firm wrongfully “repudiated” its transaction to buy Cineplex and awarded the Canadian company damages of $1.24 billion and $5.5 million in lost transaction costs.
The award is a little more than half the $2.18 billion Cineplex was seeking in damages over the abandoned deal.
Cineworld’s counterclaim against Cineplex’s legal challenge was also dismissed by the Ontario court. In a news release, Cineworld said it disagrees with the decision and will launch an appeal. The company does not expect damages will be payable while the appeal is ongoing.
Cineworld originally reached an agreement to buy Cineplex for $34 per share in December 2019, at a premium of about 42%. That deal came on the eve of the pandemic, which triggered sweeping entertainment restrictions that cratered revenue for movie theatre operators around the world.
The British firm backed out of the deal in June 2020, alleging Cineplex breached the terms of the agreement when it deferred accounts payable by at least 60 days and cut spending to the bone in response to its drop-in business activity.
Cineplex claimed before the courts that Cineworld was experiencing a case of “buyer’s remorse” in abandoning the takeover. The deal had gained shareholder approval from both companies and was originally expected to close by the end of June 2020 before Cineworld backed out.
