Britain’s Cineworld Group Plc has backed out of a deal to acquire Canada’s Cineplex Inc. (TSX: CGX) for $2.15 billion U.S., a transaction that would have made the merged companies the biggest operator of movie theaters in North America.
The company said in a statement Friday that Cineplex breached the terms of their merger agreement and was unwilling to correct the situation. Cineworld also pointed to a deterioration in Cineplex’s business conditions.
For its part, Cineplex said that Cineworld had no legal basis to terminate their accord and has "breached its contractual obligations." The Canadian company said it would start legal proceedings and seek financial damages against its onetime suitor.
In December, the U.K. company had agreed to pay $34 a share in cash for Cineplex, a 42% premium to its price at that time. The deal would have been funded by $2.3 billion U.S. of debt. With attendance declining, the movie-theater industry has been consolidating to cut costs and pay for upgrades to cinemas. But the coronavirus shut down theaters across the U.S., Canada and Europe in March.
Investors who agreed to provide Cineworld with a $1.9-billion U.S. loan in February — part of the deal financing — may get a reprieve. The loan nearly halved in value in March amid the outbreak and was most recently quoted just below 70 cents on the dollar, according to data compiled by Bloomberg.
London-based Cineworld previously spent $3.6 billion U.S. buying American operator Regal Entertainment Group in 2018. The Cineplex deal would have to let it vault past AMC Entertainment Holdings Inc. to become the biggest cinema operator in North America.
