The Globe and Mail reports in its Monday edition that no one was surprised Friday when Cineworld pulled the plug its $2.2-billion deal for Cineplex. The Globe's Jeffrey Jones writes that Cineworld said Cineplex breached conditions of the agreement, including failing to operate its business "in the ordinary course."
For more than three months investors had wondered whether the deal would collapse as cinema revenues vanished and stock prices skidded. The dispute is now a legal thriller about which material adverse effects can force an annulment.
Details are still sparse. Neither company offered information beyond what each said in news releases. Cineworld accuses Cineplex of breaching terms of the arrangement and contends that a material adverse effect did in fact occur, but it did not spell out what it was. A pandemic is specifically excluded as such a condition in the deal. Cineplex says Cineworld is having "buyer's remorse." Cineplex says it has lived up to its obligations under the agreement and Cineworld has no legal basis to pull the plug on the takeover. It also alleges Cineworld had gone into slow motion on efforts to seek Investment Canada approval, and that it could have wrapped up the deal long ago.
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