Yahoo Finance Cineworld buys Canada's Cineplex for $2.1bn to become North American giant
London-based Cineworld (CINE.L) on Monday said that it was acquiring Canada’s Cineplex chain for $2.1bn (£1.6bn), in a move that will make it the largest cinema group in North America.
Cineworld, which is already the world’s second-largest cinema company by number of screens, will gain 165 cinemas and nearly 1,700 screens in the country.
The price being paid by Cineworld, which includes debt, represents a 42% premium on Friday’s closing price.
The acquisition is set to be financed by the raising of debt, Cineworld said.
“The acquisition of Cineplex strengthens our belief in the theatrical business, one of the most affordable out-of-home forms of entertainment,” said Mooky Greidinger, the CEO of Cineworld, on Monday.
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Shares in Cineworld fell by more than 3% following the announcement of the deal, with analysts pointing to the company’s mounting debt pile, which has risen sharply since 2017.
Michael Hewson, the chief market analyst at CMC Markets UK, said the move raises questions as to whether management are “over-reaching”.
“Investors would appear to agree sending the shares sharply lower, as concerns rise over the rising levels of debt, against a backdrop of slowing revenues.”
The company has funnelled money into a revamp of its UK business, and used debt financing to fund its $3.6bn purchase of US chain Regal Cinemas in 2018.
Cineworld said it would combine Cineplex with its US operations.
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The announcement comes after Cineworld earlier this month warned that full-year revenues would come in “slightly below” expectations.
In part, it blamed the delayed release of some “highly anticipated” blockbuster films.
The group had already flagged that box office performance in 2019 would be “slower” than the comparable period last year.
Revenue from 1 January to 1 December fell 9.7%, Cineworld noted, with US revenue falling by almost 11%. This was mainly driven by a nearly 13% fall in box office revenues.
