Cineworld said it had “become aware of certain breaches by Cineplex” and decided not to go ahead with the deal because of an “unwillingness to cure the breaches”. It also said “a material adverse effect has occurred with respect to Cineplex” without giving further detail.
However, Cineplex has hit back, stating that Cineworld’s decision represents “buyer’s remorse” that it is having due to the adverse economic impact of the coronavirus pandemic.
Cineplex said the deal explicitly excluded any “‘outbreaks of illness or other acts of God’ from the definition of material adverse effect” and that since Cineworld has no legal basis to end the agreement, Cineplex will begin “legal proceedings promptly”.
Cineplex has a 75% box office market share in Canada and the takeover would have created North America’s largest chain of movie theatres, with AMC Entertainment as its main rival.
It would have added 165 cinemas to Cineworld’s existing 786 sites and 9,500 screens. AMC Entertainment owns or operates about 1,000 theatres around the world.
Cinemas have been hit hard by the pandemic as they have been closed for months. Their continued appeal is in doubt as major media companies invest heavily in streaming services and questions remain over how social distancing will change the movie-going experience.
In the UK, Cineworld hopes to start showing films in all its cinemas in July, as Britain slowly comes out of lockdown.
Last month, the company said it had managed to secure $110m by increasing the amount it is able to borrow from its banks. It has also been approved for an additional potential $45m in government-backed coronavirus large business interruption loans.
The new funding gives the company enough headroom to support the chain even if cinemas have to stay closed until the end of the year, managers said.