Cineworld takes on Cineplex in legal battle over aborted takeover

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Cineworld Group PLC (LSE:CINE) (LSE:CINE) is heading for a legal showdown with Canadian rival Cineplex (TSX:CGX) as proceedings over last year’s aborted US$2.1bn merger are scheduled to begin on September 13 in a court in Ontario.


The deal, which was agreed in December 2019, was abandoned by Cineworld last June, with the company saying Cineplex (TSX:CGX) had committed “certain breaches” of the merger contract that it had been unwilling to resolve.


READ: Cineworld predicts strong recovery in fourth quarter as lockdown subsides


However, Cineplex hit back by saying Cineworld’s allegations had been “buyer’s remorse” due to the effects of the COVID-19 pandemic on its business, which was forced to mothball most of its theatres during lockdown.


Following Cineplex’s lawsuit, Cineworld countersued in July 2020, saying it will seek C$2.18bn (GBP1.25bn) of damages less the value of Cineplex shares retained by Cineplex shareholders.


The prospect of a hefty damages payout to Cineplex will not sit well with Cineworld’s investors or its creditors, with the group currently facing a massive debt pile of US$8.5bn, around eight times its current market cap.


An ongoing legal wrangle may also make the firm a harder sell to US investors, with Cineworld saying last week that it is mulling a listing across the Atlantic to access fresh capital.


However, despite the looming legal action, the company’s shares rose 1.3% to 63.5p in lunchtime trading on Monday.

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