An anonymous director reports
CINEPLEX ANNOUNCES COMMENCEMENT OF LITIGATION AGAINST CINEWORLD
Cineplex Inc. has commenced an action in the Ontario Superior Court of Justice against Cineworld Group PLC and 1232743 B.C. Ltd. (collectively, Cineworld), seeking damages after Cineworld wrongfully repudiated the transaction to acquire Cineplex at a price of $34 per share.
Cineplex's statement of claim was issued by the Ontario court and was served on Cineworld today. The claim seeks damages, including the approximately $2.18-billion that Cineworld would have paid upon the closing of the arrangement for Cineplex's securities, reduced by the value of the Cineplex securities retained by its securityholders, as well as compensation for other losses, including the failure of Cineworld to repay or refinance Cineplex's approximately $664-million in debt and transaction expenses. Cineplex has also advanced alternative claims for damages for the loss of benefits to its securityholders and to require Cineworld to disgorge the benefits it improperly received by wrongfully repudiating the arrangement.
Cineplex claims that Cineworld breached its contractual obligations and its duty of good faith and honesty in contractual performance. Cineworld purports to rely upon alleged adverse impacts of COVID-19 on Cineplex's business to terminate the arrangement, which it is not entitled to do. The contractual agreements between the parties expressly exclude outbreaks of illness, such as the COVID-19 pandemic, as a circumstance entitling Cineworld to terminate the arrangement. Without any legal right to avoid its contractual obligations, Cineworld intentionally chose to breach its obligations, including its obligation to seek timely regulatory approval for the arrangement under the Investment Canada Act. On June 12, 2020, Cineworld purported to terminate arrangement and unilaterally withdrew the request for Investment Canada Act approval.
Cineworld's actions to prevent the arrangement from closing in light of the COVID-19 pandemic is nothing more than a case of buyer's remorse. While Cineplex honoured all of its obligations under the arrangement, Cineworld did not.
Due to uncertainties inherent in litigation, it is not possible for Cineplex to predict the timing or final outcome of the legal proceedings against Cineworld or to determine the amount of damages, if any, that may be awarded.
About Cineplex Inc.
Cineplex is a top-tier Canadian brand that operates in the film entertainment and content, amusement and leisure, and media sectors. As 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.
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