Cineworld, the leading UK-based multiplex cinema chain, is likely to acquire Canada’s entertainment company, Cineplex for $2.1 billion on December 15, 2019.
The deal will make the exhibition giant, Cineworld, a dominant player in the global entertainment market in the country. The company had already acquired the US cinema chain, Regal Cinemas, in 2018 for $3.6 billion.
Acquisition Deal Makes Cineworld A Dominant Player
Cineplex, as the biggest entertainment operation in Canada, has extended its 165 multiplex cinemas, which provides around 1,695 screens. Cineplex holds a 75% market share of the Canadian box office, received revenue of around $770 million in 2018.
As per the deal, Cineworld will pay the Canadian dollar 34 per share in cash. The deal will make Cineworld the largest cinema chain in North America, in terms of the number of screens.
The Cineworld’s Board of Directors and the company’s largest shareholder (Global City Theatres B.V., which holds an approximate 28% stake in the company) approved the deal, which is likely to be finalized by the end of the mid-2020.
Citing the deal as “Highly synergistic,” Cineworld explained, “The deal will generate approximately $130 million of annual pre-tax combination benefits by the end of 2021. There is expected to be a double-digit accretive to earnings and free cash flow in the first full year following completion (2021) and the return on invested capital is expected to exceed Cineworld’s cost of capital that same year.”
Cineworld, in this summer 2019, launched a movie ticket subscription service under the name of the Regal Unlimited in the US, which generated high revenue.
Statements from the CEO of the Companies
Mooky Greidinger, the CEO of Cineworld, commented, “Cineplex is a great business. It is the number one cinema operator in Canada and is well-positioned for further growth. The combination of Cineplex and Regal will create the leading North American cinema operator with an unrivaled scale and opportunity.
By deploying our operational best practices, we expect the transaction to create compelling value for shareholders and to be strongly EPS and free cash flow accretive.”
He further added, “The acquisition of Cineplex strengthens our belief in the theatrical business, one of the most affordable out-of-home forms of entertainment. We constantly strive to provide the best customer experience and maintain technological leadership and we are excited about Cineworld’s prospects for 2020 and beyond as we look to complete the Cineplex transaction, our US refurbishment program and the rollout of Unlimited, and we look forward to the great selection of movies to come.”
Anthony Bloom, the Chairman of Cineworld, added today, “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 strong earnings and cash flow accretive. Going forward our immediate post-acquisition objectives will be to combine Cineplex with our US business to create a leading North American cinema operator; maximize 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 3x net debt/EBITDA by the end of 2021.”
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