21:02:23 EDT Thu 06 Aug 2020
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or Name

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Cineplex Inc
Symbol CGX
Shares Issued 63,333,238
Close 2020-06-12 C$ 13.82
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Cineplex acquisition by Cineworld dropped

2020-06-12 20:46 ET - News Release

Ms. Sarah Van Lange reports


Cineworld Group PLC has delivered notice to Cineplex Inc., purporting to terminate the arrangement agreement among Cineplex and Cineworld dated Dec. 15, 2019. Under the arrangement agreement, Cineworld agreed to acquire all of the issued and outstanding common shares of Cineplex. Cineplex believes that Cineworld has no legal basis to terminate the arrangement agreement and that Cineworld has breached its contractual obligations. Cineworld's repudiation of the arrangement agreement has been acknowledged by Cineplex,and the transaction will not proceed. Cineplex intends to commence legal proceedings promptly against Cineworld and seek damages for Cineworld's breaches of the arrangement agreement and failure to discharge its obligations thereunder.

In the termination notice, Cineworld alleges that Cineplex has taken certain actions that constitute breaches of Cineplex's covenants under the arrangement agreement, including failing to operate its business in the ordinary course. In addition, Cineworld alleges that a material adverse effect has occurred with respect to Cineplex.

Cineplex vigorously denies Cineworld's allegations. The arrangement agreement explicitly excludes any "outbreaks of illness or other acts of God" from the definition of material adverse effect, and all of Cineworld's allegations stem from an outbreak of illness and act of God (COVID-19). Cineplex believes that Cineworld's allegations represent buyer's remorse, and are an attempt by Cineworld to avoid its obligations under the arrangement agreement in light of the COVID-19 pandemic.

Cineworld has breached the arrangement agreement and other contractual obligations because, among other failures, it did not use its reasonable best efforts to obtain approval under the Investment Canada Act as soon as reasonably practicable, and has now repudiated the arrangement agreement.

If Cineworld had complied with its obligations to obtain ICA approval, Cineplex believes that the ICA approval would have been obtained, and the transaction would have closed months ago. Cineplex will file suit promptly to recover all damages available to it to under the arrangement agreement and hold Cineworld responsible for its breaches and failure to complete the transaction at $34 per common share.

The foregoing summary of certain provisions of the arrangement agreement is qualified in its entirety by the provisions of the arrangement agreement, a copy of which is available on SEDAR.

Since May 7, 2020, being the date Cineplex announced that it was relying on the blanket relief provided by the Canadian Securities Administrators to delay the filing of its interim financial statements and related management's discussion and analysis for the three-month period ended March 31, 2020, there have been no material business developments other than as described in this news release.

About Cineplex Inc.

Cineplex is a top-tier Canadian brand that operates in the film entertainment and content, amusement and leisure, and media sectors. A leading entertainment and media company, Cineplex welcomes millions of guests annually through its circuit of theatres and location-based entertainment venues across the country. In addition to being Canada's largest and most innovative film exhibitor, Cineplex also operates successful businesses in digital commerce (Cineplex store), food service and alternative programming (Cineplex events), cinema media (Cineplex media), digital place-based media (Cineplex digital media) and amusement solutions (Player One Amusement Group). Additionally, Cineplex operates Canada's favourite destination for eats and entertainment (the Rec Room) and entertainment complexes specially designed for teens and families (Playdium).

We seek Safe Harbor.

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