Canada’s Cineplex Acquired By UK-based Cineworld

December 16, 2019 by Dave Haynes

The Canadian entertainment giant Cineplex, which has a very active digital signage and digital OOH business unit, has a tentative deal to be acquired by UK-based Cineworld Group.

With more than 11,200 screens around the globe (including a bunch of them as Regal Cinemas in the US), the proposed transaction would create one of the world’s largest cinema companies.

Cineworld Group will acquire all of the issued and outstanding common shares of Cineplex for $34 per share in cash, a  42% premium to the closing price on the Toronto Stock Exchange. The total transaction value is approximately $2.8 billion, including the assumption of net debt.

“Since Cineplex went public in 2003, we have been committed to delivering value to our shareholders. We believe this transaction today is both financially compelling and in our shareholders best interest,” says Ellis Jacob, President and CEO, Cineplex. “Cineworld Group shares our passion for entertainment and mirrors our commitment to delivering exceptional guest experiences through state-of-the-art technology.  The entertainment industry continues to transform and we are pleased that through this agreement we are ensuring Cineplex is part of the next era of global entertainment.”

In announcing the deal, the PR says:

The transaction ensures that Cineplex’s business, particularly its network of 165 movie theatres across Canada, has access to the global opportunities required to compete effectively in an evolving entertainment landscape. Cineplex’s long legacy of supporting the Canadian entertainment industry and its partners in the arts, including support for film festivals, programs and industry events across Canada, will continue. 

The transaction also creates a new partner for the Canadian film industry to collaborate with, as Cineworld Group has extensive distribution and exhibition businesses outside of Canada.

The transaction is expected to close during the first half of 2020, and includes a clause and “go-shop period” through January that permits Cineplex to shop around for a better deal.

The Cineplex Digital Media wing of Cineplex – which does signage solutions for clients like QSR – and its digital media sales group in malls and elsewhere are substantial, but a small percentage of the overall Cineplex business. The company makes most of its money in movie tickets and concession sales, and it has been increasingly expanding into areas like giant restaurant/bars with entertainment elements, and TopGolf driving ranges.

What happens whenever there are mergers is a big Who Knows? There are lots of stories of leadership changes in merged companies that result in non-core business units being shut down. But digital media represents diversification in a business that needs diversification. This deal might see the digital media expanding its capabilities into Europe, whereas most of what that team does right now is in Canada and the U.S.

Having noted that, 75% of Cineworld’s revenues come out of the US, and the UK and Ireland are just 15%.

Here’s a podcast I did with Fab Stanghieri back in May …