United Kingdom-based Cineworld Group will become one of the world’s largest cinema company with the purchase of Canadian company Cineplex Inc.
On December 16, 2019, Cineplex Inc, one of Canada’s leading entertainment and media companies, announced that it entered into an agreement for the acquisition of its shares by Cineworld Group.
“The board of Cineworld believes that the acquisition of Cineplex is in the interests of its shareholders as it fits squarely within our strategic acquisition objectives and is expected to be strongly earnings and cash flow accretive,” Anthony Bloom, Chairman of Cineworld, said.
“Going forward our immediate post-acquisition objectives will be to combine Cineplex with our US business to create a leading North American cinema operator; maximise the synergistic combination benefits of the Cineplex acquisition; continue the currently successful refurbishment of the Regal chain in the US; and focus strongly on a structured debt reduction program targeting leverage towards three times net debt / EBITDA by the end of 2021,” he continued.
As part of the arrangement, Cineworld Group will pay CA$34.00 for all issued and outstanding common shares or approximately CA$2.8 billion with the assumption of all Cineplex Inc’s debt. The unit price per share represents a 42 per cent premium on the closing price of the Canadian company’s share on December 13, 2019.
With the purchase, Cineworld Group will increase the number of screens it operates to 11,200 worldwide.
According to president and CEO of Cineplex Inc Ellis Jacob, “We believe this transaction today is both financially compelling and in our shareholders’ best interest.”
“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,” he added.
For Cineplex Inc, the acquisition will enable it to scale and compete in the fast-changing global entertainment industry. The Canadian operation will also gain global distribution through its new British owners.
On the other hand, Cineworld Group will gain a foothold in the Canadian box office market with a market share of approximately 75 per cent by box office revenue, based on figures as at 30 September 2019. Further, the British company said ” the acquisition represents an exciting opportunity to enter the stable and attractive Canadian market”.
Subject to Cineworld and Cineplex shareholder approvals and various regulatory consents, amongst other things, both companies expect the transaction will close in the first half of 2020.
“Cineworld estimates that, following completion, Cineworld and Cineplex (together, “the Enlarged Group”) will be able to achieve run-rate annualised pre-tax combination benefits of approximately US$130 million (excluding one-off implementation costs),” the UK-headquartered company said.