Canada's Cineplex to sue Cineworld Group, seeks damages for scrapped dealChristian Fernsby ▼ | July 4, 2020
Cineplex announces that it has commenced an action in the Ontario Superior Court of Justice against Cineworld Group plc and 1232743 B.C., seeking damages after Cineworld wrongfully repudiated the transaction to acquire Cineplex at a price of $34 per share.
Cineworld Group Canada Cineplex
Topics: Cineplex Cineworld
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 coronavirus 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. ■