BUSINESS
12/16/2019 08:07 EST | Updated 12/16/2019 10:54 EST

Cineplex Set To Be Sold To U.K.'s Cineworld For $2.8 Billion

Canada's largest cinema operator has 165 movie theatres.

Chris Wattie/REUTERS
The Cineplex logo is seen outside a movie theatre in Ottawa on Feb. 14, 2019. Canada's largest movie chain is being bought by a U.K.-based cinema operator.

TORONTO — Cineplex Inc. shares jumped to their highest level in a year on news it has agreed to be purchased by a U.K. company in a takeover deal that values the operator of Canada’s largest chain of movie theatres at $2.8 billion, including debt.

Cineworld Group PLC has agreed to pay $34 per share in cash, a 42-per-cent premium to the closing price for Cineplex shares Friday. Cineplex shares rose to that level in early trading after the Toronto Stock Exchange opened.

“Given CGX’s significant market share in Canada and historical premium to U.S. peers, we believe the elevated valuation was largely warranted and expect that CGX shareholders are likely to approve of such a transaction,” analyst Aravinda Galappatthige wrote in a research note for Canaccord Genuity.

 

If the deal receives is approved by shareholders and regulators, Cineplex will become part of a global company listed on the London Stock Exchange.

Cineplex is a Toronto-based cinema chain with 165 movie theatres across Canada.

Cineworld says it’s the second-largest cinema business in the world, by number of screens, with operations in the U.K., Ireland, Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania, Israel and the U.S.

“We believe this transaction today is both financially compelling and in our shareholders best interest,” Ellis Jacob, Cineplex’s president and CEO, said in a statement.

“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 companies expect the transaction to close in the first half of 2020.

However, Cineplex has seven weeks to solicit and negotiate with other potential buyers who may be willing to pay more for the company.

Cineworld would be receive a termination fee under certain circumstances including if Cineplex finds another buyer with a superior offer.

Cineplex has diversified in recent years into a variety of entertainment-related businesses including advertising, events programming and the Rec Room — a chain of locations serving food, drink and amusements.

This report by The Canadian Press was first published on Dec. 15, 2019.

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