Cineplex delays Q1, says Cineworld ‘remains committed’ to deal

The Canadian exhibitor said both parties are working to bring the mega-deal to fruition by June 30.
Cineplex

Cineplex has deferred the filing of its first-quarter financial results until late June as it continues to focus on responding to the COVID-19 crisis, the cinema giant announced Thursday.

The filing was originally due on May 15 but blanket relief provided by the Canadian Securities Administrators means companies have a 45-day extension on regular filings. Postmedia had also taken advantage of the relief, opting to delay its most recent quarterlies until this week.

With the extension, Cineplex said it will report its Q1 results (for the period ending March 31) no later than June 29, the day before the originally scheduled date for the closure of its $2.8 billion acquisition by U.K.-based Cineworld Group.

Despite a challenged and uncertain environment for the theatre exhibition industry across the world, the Canadian company said Cineworld Group “has advised Cineplex that it remains committed” to closing the deal on or before June 30. However, the Canadian exhibition company noted there “can be no assurance that the conditions to closing the transaction will be satisfied” by that date. Among the conditions of the deal is that Cineplex’s debt does not exceed $725 million.

While the mega-deal has already passed muster with the Ontario Superior Court of Justice, approval of the transaction through the Investment Canada Act is still pending. Cineplex said both parties are “continuing to advance the process.” The time period for the Investment Canada Act review has been extended to June 1 and further extensions may be warranted in light of the current environment, noted Cineplex.

In the two months since the COVID-19 pandemic necessitated global cinema closures, Cineplex has temporarily laid off thousands of part-time workers while Cineworld has also furloughed employees across its U.K. and U.S. subsidiaries as the companies look to weather an unprecedented crisis for the theatrical exhibition sector. Both companies have also slashed executive salaries in a bid to curtail costs.

However, some have expressed optimism that light may be appearing at the end of the tunnel, with Cineworld CEO Mooky Greidinger earlier this week saying the prospect of reopening theatres before the end of June was “very realistic.”

In Canada, the timeline on which theatres could reopen remains unclear. Cineplex on April 2 said it will keep its cinemas closed indefinitely and continue to monitor the situation and adhere to recommendations.

Going forward, Cineplex said it expects the circumstances caused by the pandemic to have a “material negative impact on its business, financial condition and results of operations for at least the first half of 2020.”

The company added that: “This impact cannot be quantified at this time because of the significant uncertainty associated with the ultimate extent, duration and severity of the pandemic itself, and with the government restrictions and other factors associated with or resulting from that pandemic, many of which are beyond Cineplex’s control.”

Following the initial acquisition announcement in December, Cineplex shares climbed as high as $34 per share. Shares dropped as low as $8.84 per share in mid-March when the pandemic forced cinemas across Canada to close, though the stock price has climbed steadily in the time since. At press time, Cineplex shares were trading at around $14.70. Cineworld’s share price has mirrored that trajectory, dropping from £220 in January to £21 in mid-March, before climbing to above £60 per share at press time.

This story originally appears in Playback.