Regal owner Cineworld has called off its planned $2.1 billion takeover of Canadian exhibitor Cineplex, which would have created one of the world’s largest cinema companies with more than 11,200 screens globally.
“Cineworld has become aware of certain breaches by Cineplex Inc. of the arrangement agreement relating to the acquisition… In addition, a material adverse effect has occurred with respect to Cineplex. As a consequence of these matters and Cineplex’s unwillingness to cure the breaches, Cineworld has notified Cineplex that it has terminated the arrangement agreement with immediate effect. The acquisition will therefore not proceed,” the U.K.-based suitor said Friday in a statement.
Cineworld did not specify what the alleged breaches of the transaction by Cineplex were as it backed out of the deal.
In its own statement on Friday, Cineplex rebuffed Cineworld’s claim that it had breached the terms of their merger agreement and said it will take legal action to recover damages as the transaction does not proceed. “Cineplex believes that Cineworld has no legal basis to terminate the arrangement agreement and that Cineworld has breached its contractual obligations. Cineworld’s repudiation of the arrangement agreement has been acknowledged by Cineplex and the transaction will not proceed,” the Canadian company said.
In February, the mega-deal received approval from both companies’ shareholders. But some analysts and investors urged the companies to abandon the transaction, especially when the coronavirus pandemic shuttered the circuits of major exhibitors, including Cineplex and Cineworld, and created high debt and liquidity concerns.
In a battle of competing statements on Friday, Cineplex claimed Cineworld’s allegations of breached terms for their merger agreement amounted to “buyer’s remorse” and an attempt to wriggle out of the transaction amid the COVID-19 crisis. “The arrangement agreement explicitly excludes any ‘outbreaks of illness or other acts of God ‘from the definition of material adverse effect and all of Cineworld’s allegations stem from an outbreak of illness and act of God (COVID-19),” the Canadian company said.
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