BUSINESS
07/06/2020 10:23 EDT

Cineplex Faces Counter-suit In Fight Over Scrapped $2.8-Billion Takeover

The Canadian company is suing Cineworld for backing out of a deal.

Chris Helgren/REUTERS
A Cineplex movie theatre sign looms over Yonge Street in Toronto on March 16, 2020. Analysts say they expect Cineworld to buy Cineplex on "revised terms" after the former backed out of a takeover deal.

Cineworld said Monday it planned to make a counter-claim against Cineplexfollowing the Canadian cinema chain’s legal action against the British group for damages after it scrapped a $2.8-billion takeover.

Cineplex said last week it was suing Cineworld for damages, including about $2.18 billion that Cineworld would have paid on closing of the deal.

The British company abandoned the takeover last month, citing what it termed the Canadian company’s breaches in the merger agreement.

On Monday, Cineworld said it did not breach any obligations or duties and said if Cineplex’s claim was successful, it would be limited to its costs and expenses incurred as part of the deal.

“Cineworld is entitled to recover from Cineplex all damages and losses that it has suffered as a result of Cineplex’s breaches and the acquisition not proceeding,” Cineworld said in a statement. “Cineworld intends to counter-claim against Cineplex for these damages and losses.”

Cineplex has denied these claims.

The deal was announced in December and would have made the British company North America’s biggest cinema operator.

“We expect the legal actions to take some time, but in the end, once the relative strength of each side’s legal position has been tested, we expect Cineworld to acquire Cineplex on revised terms,” Peel Hunt analysts said.

Cineplex appeared unable to find another buyer prepared to make a superior offer when it had the chance to, pre-COVID-19, and seems unlikely to do so now,” the Peel Hunt analysts said.

Cineworld said last month it had secured a $250-million debt facility from a group of investors as it was gearing up to reopen theatres following the easing of coronavirus-led lockdowns globally.

Cineworld operates about 9,500 screens globally, with more than 7,000 in the U.S.

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