Cineworld has signed an agreement to acquire Cineplex, Canada’s leading exhibition circuit.
The announcement comes only two years after U.K.-based Cineworld entered the North American market with its acquisition of Regal Cinemas, the second-largest cinema chain in the United States. By adding Cineplex to its multi-national roster of cinemas, the proposed transaction would give the Cineworld over 11,200 screens in markets that include the United States, Canada, the United Kingdom & Ireland, Czech Republic, Slovakia, Hungary, Bulgaria, Romania, and Israel.
As Canada’s largest exhibition circuit, Cineplex currently operates a network of 165 cinemas with nearly 1,700 screens. The chain is an influential figure in the North American box office and has played an influential role in marquee industry events, such as the Toronto International Film Festival.
The deal also means Canada’s two leading circuits would become part of European multi-national mega-circuits, following the 2017 acquisition of Landmark Cinemas of Canada by Belgium-based Kinepolis.
According to a company press release, Cineworld Group will acquire all of the issued and outstanding common shares of Cineplex for $34 per share in cash, representing a premium of 42% to the closing price on the Toronto Stock Exchange (TSX) and a premium of 39% to the volume weighted average share price on the TSX for the 30 days ending December 13, 2019.
“Since Cineplex went public in 2003, we have been committed to delivering value to our shareholders. We believe this transaction today is both financially compelling and in our shareholders best interest,” said Ellis Jacob, President and CEO, Cineplex. “Cineworld Group shares our passion for entertainment and mirrors our commitment to delivering exceptional guest experiences through state-of-the-art technology. The entertainment industry continues to transform and we are pleased that through this agreement we are ensuring Cineplex is part of the next era of global entertainment.”
The transaction is subject to customary closing conditions including regulatory approvals and expected to close during the first half of 2020. The Arrangement Agreement includes a 7 week go-shop period expiring on February 2, 2020. It permits Cineplex to actively solicit, evaluate, and enter into negotiations with third parties that express an interest in acquiring its business.
Should the deal not close, Cineworld is subject to receive a termination fee in certain circumstances, including if Cineplex fails to complete the transaction following receipt of a superior proposal or if Cineworld fails to obtain the required shareholder approval of its shareholders.
Scotiabank is acting as Cineplex’s exclusive financial advisor and its legal advisors are Goodmans LLP (Canada), Herbert Smith Freehills LLP (U.K.) and Baker & McKenzie (U.S.).