Published Jul 06, 2020After promising to take legal action, Cineplex has followed through with a lawsuit against Cineworld for backing out of a $2.8 billion takeover deal last month. The Canadian movie theatre giant is seeking damages that could exceed $2.18 billion after the U.K. chain scrapped the sale, claiming that the termination of the deal is the result of "buyer's remorse."
In the suit — obtained by the Canadian Press — Cineplex states that Cineworld's claims of the company breaching contract are untrue — a stance it's willing to "vigorously defend any allegation to the contrary." Back in June, Cineworld cited vague breaches of contract as the reason for terminating the deal.
In the newly filed lawsuit, Cineplex is seeking the $2.18 billion that Cineworld would have paid if the deal actually closed, minus the value of Cineplex's securities retained by its holders, CP reports. In addition, Cineplex is seeking various other compensation, including for the $664 million in debt and transaction expenses that Cineworld would have taken on if the deal had closed. The lawsuit also mentions repayments of certain "benefits" Cineworld received as part of the transaction.
As of press time, Cineworld has not publicly commented on the lawsuit.
Cineworld struck the deal to buy out Cineplex late last year — long before COVID-19. The deal found it buying Cineplex for $34 per share, a 42 percent premium on the chain's stock price at the time. Since the start of the pandemic, shares in the company have dropped to a wimpy $8.50 as of Friday (July 3).
The Cineworld deal would have seen the company also taking over Cineplex's $664 million in debt.
While the Canadian company kept its 165 theatres closed during the pandemic, select theatres across the country have already started reopening in British Columbia, Alberta, Saskatchewan, Quebec, New Brunswick, Nova Scotia and Newfoundland.
The company has vowed to implement a variety of new health and safety protocols as it navigates the next stage of the crisis. Though, face masks will not be enforced.
Meanwhile, drive-in theatres across the country are popping up in response to ongoing physical distancing recommendations.