Cineworld sparks legal row by pulling out of £1.6bn Cineplex takeover
Cineworld has pulled out of its £1.6bn deal to become the biggest cinema chain in America, sparking bitterness and the potential of a legal battle.
The London-listed company claims Cineplex, Canada’s biggest cinema chain, has suffered a “material adverse effect” under the terms of the deal, which included a ceiling of $725m (£578m) on its debts.
Cineplex, on the other hand, accuses the UK company of unlawfully abandoning the deal.
It said this was driven by coronavirus lockdown-induced pressure on Cineworld’s finances.
Cineworld said: “As a consequence of … Cineplex’s unwillingness to cure the breaches, Cineworld has notified Cineplex that it has terminated the arrangement agreement with immediate effect.”
“Cineworld has complied with all of its obligations under the Arrangement Agreement and it is entitled to terminate the Arrangement Agreement. It will therefore vigorously defend any allegation to the contrary.”
Cineplex, however, said: “The arrangement agreement explicitly excludes any ‘outbreaks of illness or other acts of God’ from the definition of material adverse effect.”
It added that Cineworld had no legal basis to pull out of the deal.
The Canadian company said it would begin legal proceedings to recover damages.
Cineworld said it reserved its own right to seek damages from the Canadian company.
The deal was the latest of several acquisitions made by Cineworld, which is run by the Greidinger family in Israel.
The company has struggled with heavy debts since its buyout of Regal in February 2018, and has since become the target of criticism on one side, and short sellers on the other.