The Globe and Mail reports in its Tuesday edition that Canaccord Genuity analyst Aravinda Galappatthige sees Cineplex starting legal proceedings against Cineworld in the wake of it walking away from the $2.2-billion deal to acquire the Canadian theatre operator. The Globe's David Leeder writes that Mr. Galappatthige expects Cineplex to commence focusing on stabilizing its balance sheet and revising its credit arrangements "as many in the space have done."
In its announcement late Friday, U.K.-based Cineworld said Cineplex breached conditions of the agreement, including failing to operate its business "in the ordinary course." Keeping a "speculative buy" rating for Cineplex, Mr. Galappatthige trimmed his share target to $17 from $21.50. Analysts on average target the shares at $18.43. Mr. Galappatthige says in a note: "During the current COVID-19 crisis [Cineplex] does not appear to have been materially different to other cinema chains or similar businesses affected by the conditions. Thus, the definition of 'operating in the ordinary course' needs to be scrutinized. In other words, how can a cinema chain operate under normal course in the midst of a pandemic with all locations shut down for months?"
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