(Bloomberg) -- A Canadian court awarded Cineplex Inc. C$1.24 billion ($965 million) in damages from Cineworld Group Plc after the British chain walked away from a takeover because of the coronavirus outbreak.
Cineworld agreed to buy Toronto-based Cineplex for about $1.6 billion in December 2019 in an attempt to become North America’s largest operator of movie theaters. It scrapped the plan nearly six months later after the Covid-19 pandemic forced entertainment venues to close, and Cineplex sued for breach of contract.
“Cineworld disagrees with this judgment and will appeal the decision. Cineworld does not expect damages to be payable whilst any appeal is ongoing,” the London-based company said in a statement late Tuesday.
Cineworld’s shares have slumped 29% this year after a 71% loss in 2020 as it tries to manage a large debt burden. It’s rated CCC by S&P Global Ratings.
Cineworld’s “$5 billion debt load is a concern and the company needs a strong 2022 to generate cash and delever the balance sheet,” Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near said in a Nov. 15 research note.
As for Cineplex, Canadian theaters have reopened and the country has vaccinated about 80% of the eligible population, but it’s still struggling to attract moviegoers to its 161 locations. It reported 8.3 million theater customers in the third quarter, fewer than half the number it saw in the same period of 2019.
Cineplex shares are 65% below the C$34 a share that Cineworld offered in the now-broken deal.
“We are pleased that the court found Cineplex acted properly throughout this difficult period in our history,” Chief Executive Officer Ellis Jacob said in a statement. The court also denied Cineworld’s counterclaim, Cineplex said.
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