Cineplex sues former buyer Cineworld, seeking damages over failed deal

Cineplex sues former buyer Cineworld, seeking damages over failed deal

TORONTO — Cineplex Inc. has filed a lawsuit against its former suitor Cineworld Group PLC, seeking damages over the U.K. company’s failed acquisition that could exceed the $2.18 billion outstanding on the deal.

The Canadian movie theatre operator filed the suit in Ontario Superior Court on Friday, detailing what it claims was “a case of buyer’s remorse” on the part of the U.K. company in the middle of a pandemic that’s seen cinemas across the world unable to operate.

Cineworld walked away from the $2.8-billion deal on June 12, saying it had become aware of a material adverse effect and breaches by the Toronto-based company.

Cineplex says it complied with its obligations under the agreement and vowed to “vigorously defend any allegation to the contrary.”

The Canadian chain is seeking damages that include the $2.18 billion that Cineworld would have paid had the deal closed, minus the value of Cineplex’s securities retained by its holders.

It’s also seeking compensation for the $664 million in debt and transaction expenses that Cineworld would have shouldered had the deal successfully closed, as well as repayment of certain “benefits” it received as part of the transaction.

A representative for Cineworld did not respond for comment.

Sarah Van Lange, a spokeswoman for Cineplex, says it’s “not possible for Cineplex to determine the amount of damages” it’s seeking in total, due to uncertainties inherent in litigation, including the determined value of Cineplex shares.

The company’s share price has fallen substantially since the Cineworld deal was struck in late 2019, due to a confluence of factors that included weakened optimism for the 2020 movie slate, and the sudden closure of theatres due to COVID-19 in March.

Cineworld offered to buy Cineplex at $34 per share, a 42 per cent premium on the chain’s stock price at the time, but by March the company’s shares had dropped below $10 on the Toronto Stock Exchange. Cineplex closed at $8.50 per share on Friday.

The Canadian exhibitor has slowly resumed business at locations in certain parts of the country, including British Columbia and Alberta, though the company delayed a more extensive reopening plan as Hollywood studios delayed the release of most of their titles due to an escalation of virus cases in some U.S. states.

On Tuesday, Cineplex said it reached a deal with its lenders to provide some financial relief due to the pandemic, but warned about its ability to “continue as a going concern.”

This report by The Canadian Press was first published July 3, 2020.

Companies in this story: (TSX:CGX)

David Friend, The Canadian Press

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta children whose only symptom of COVID-19 is a runny nose or a sore throat will no longer require mandatory isolation, starting Monday.
477 new COVID-19 cases confirmed in Alberta on Thursday

Changes being made to the COVID-19 symptom list for school-age children

Alisha Bryan holds a handful of poppy sticks at the poppy laying ceremony on Oct. 28. (Alannah Page/Lacombe Express)
Remembrance Day will look a little different this year for Lacombe

The Lacombe Legion is taking COVID-19 precautions for people who want to pay their respects.

Chad Carlson (left) Jarita Carlson and their two children Milo Carlson (left) and Lennon Carlson are dressing up as Ghostbusters for Halloween. (Alannah Page/Lacombe Express)
Lacombe family passionate about Halloween and giving back to their community

COVID-19 has changed how the Carlson’s will celebrate Halloween this year

The Lacombe Legion volunteers laid poppies beside the graves of veterans on Oct. 28. (Alannah Page/Lacombe Express)
Lacombe Legion volunteers lay poppies for fallen veterans

Twenty volunteers showed up on Wednesday to pay their respects and help out

There were 410 COVID-19 cases recorded in Alberta Wednesday. (File photo by The Associated Press)
Alberta records 410 new COVID-19 cases Wednesday

Central zone dropped to 160 active cases

Royal Alexandra Hospital front-line workers walk a picket line after walking off the job in a wildcat strike in Edmonton, on Monday, October 26, 2020. THE CANADIAN PRESS/Jason Franson
Alberta labour board orders health-care staff who walked off the job to go back to work

Finance Minister Travis Toews said in a news release that he was pleased with the labour board’s decision

Pilots Ilona Carter and Jim Gray of iRecover Treatment Centres, in front of his company’s aircraft, based at Ponoka’s airport. (Perry Wilson/Submitted)
95-year-old Ilona Carter flies again

Takes to the skies over Ponoka

Children’s backpacks and shoes are seen at a daycare in Langley, B.C., on Tuesday May 29, 2018. Alberta Children’s Services Minister Rebecca Schulz says the province plans to bring in a new way of licensing and monitoring child-care facilities. THE CANADIAN PRESS/Darryl Dyck
Alberta proposes legislation to change rules on child-care spaces

Record-keeping, traditionally done on paper, would be allowed digitally

Prime Minister Justin Trudeau shakes hands with US Vice-President Joe Biden on Parliament Hill in Ottawa on Friday, December 9, 2016. THE CANADIAN PRESS/ Patrick Doyle
A Biden presidency could mean good news for Canadian environment policy: observers

Experts and observers say even a U.S. outside the Paris agreement may ultimately end up in the same place

People take a photo together during the opening night of Christmas Lights Across Canada, in Ottawa, on Wednesday, Dec. 4, 2019. The likelihood that most Canadians will enjoy a holly jolly Christmas season of gatherings, caroling and travel is unlikely, say public health experts who encourage those who revel in holiday traditions to accept more sacrifices ahead. THE CANADIAN PRESS/Justin Tang
Ho, ho, no: Experts advise preparing for a scaled-back COVID holiday season

Many of the holiday season’s highlights have already been scrapped or are unlikely to take place

Sen. Kim Pate is shown in Toronto in an October 15, 2013, file photo. The parliamentary budget office says a proposed law that would give judges discretion on whether to apply a lesser sentence for murder could save the federal government $8.3 million per year. THE CANADIAN PRESS/Colin Perkel
Judicial discretion for mandatory minimum sentences for murder would save $8.3M: PBO

The result would be fewer people in long-term custody at federal correctional institutions, experts say

Husky Energy logo is shown at the company’s annual meeting in Calgary on May 5, 2017. THE CANADIAN PRESS/Jeff McIntosh
Husky pipeline spills 900,000 litres of produced water in northwestern Alberta

The energy regulator says environmental contractors are at the site

A raccoon paid a visit to a Toronto Tim Hortons on Oct. 22, 2020. (shecallsmedrew/Twitter)
Who are you calling a trash panda? Raccoon takes a shift at Toronto Tim Hortons

Tim Hortons said animal control was called as soon they saw the surprise visitor

Most Read