(Image via Cineplex.com)
The news wasn’t exactly unexpected among investors, but despite a major deal falling through, Canada’s largest theatre chain is making moves to go forward. What will this mean for the future of entertainment, not to mention mergers and acquisitions in a post-COVID business world, remains to be seen ….
Since the beginning of the year, Stockhouse Editorial has been following the ongoing developments behind
Cineplex Inc. (TSX: CGX) and its $2.8 billion takeover by Britain’s
Cineworld Group Plc (LSE: CINE), but that
deal was terminated a few days ago over “certain breaches” of the acquisition deal.
Cineplex stated that it intends to commence legal proceedings against Cineworld. The specifics behind what those breaches were hadn’t been clarified and Cineplex denied such breaches, but the ongoing pandemic and its fallout, chiefly everything around social distancing and the effect it has had on the theatre industry, seems clear enough. It has been three months since Cineplex closed its network of theatres and entertainment venues across Canada.
Cineplex is looking ahead and on Monday unveiled part of its
contingency plan, which includes launching reserved seating in all auditoriums across the country to ensure proper physical distancing. As provincial governments begin to ease social gathering restrictions, Cineplex wants to be able to resume measured operations at its Rec Room locations in Winnipeg, Calgary, and Edmonton as soon as later this week. Cineplex is also working toward reopening six theatres in Alberta on June 26th, 2020, followed by opening as many locations as it can by July 3rd, 2020.
CGX stock has been nothing short of battered this year, mostly no fault of the company, just a combination of changing demographic habits and a global pandemic. This recent news hasn’t helped its performance, but there is solid history behind the Cineplex story and also a clear path forward, which could make this basement-dwelling position for its stock a prime bargain time.
See also: “Cineplex – A Buy Now or Later?”
(Cineplex Stock Chart – June 8th to 15th 2020.)
While both the termination of the Cineworld deal and reopening strategy were both predicted by the investment community at large, does it also appear that seeking damages for Cineworld's breaches of agreements and reopening strategy could be “too much, too soon” for the struggling theatre chain? Let us know your thoughts in the comments below.