Cineworld cuts plans for £1.6bn Cineplex acquisition in legal row
A UK cinema chain has announced that it is cancelling its £1.6bn acquisition of a Canadian competitor following a breach of contract.
Cineworld, headquartered in London, reported that it is terminating its arrangement agreement with Cineplex, which would have seen it take over the brand by the end of this month.
The company said that it had “become aware of certain breaches by Cineplex”, and that a material adverse effect had occurred.
It added that it would be seeking damages from Cineplex due to the breaches in the agreement.
Cineplex has denied these breaches, and has separately said that it believes that Cineworld has failed to comply with its own obligations - which Cineworld denies.
The Canadian company also said that it believes the allegations are “buyer’s remorse” due to the market uncertainty caused by COVID-19, and that it will be taking the matter to court.
In its statement, Cineworld said: “As a consequence of these matters and Cineplex’s unwillingness to cure the breaches, Cineworld has notified Cineplex that it has terminated the arrangement agreement with immediate effect.
“The acquisition will therefore not proceed.
“Cineworld has complied with all of its obligations under the arrangement agreement and it is entitled to terminate the arrangement agreement.
“It will therefore vigorously defend any allegation to the contrary.
“Cineworld has also reserved its right to seek damages from Cineplex in respect of Cineplex’s breaches of the arrangement agreement, which, in addition to the occurrence of the material adverse effect, gave rise to the termination.”
Cineplex has responded to the statement, saying: “Cineplex believes that Cineworld has no legal basis to terminate the arrangement agreement and that Cineworld has breached its contractual obligations.
“Cineworld’s repudiation of the arrangement agreement has been acknowledged by Cineplex and the transaction will not proceed.
“Cineplex believes that Cineworld’s allegations represent buyer’s remorse, and are an attempt by Cineworld to avoid its obligations under the (agreement) in light of the COVID-19 pandemic.”
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