British cinema chain Cineworld set to become big in North America

British cinema chain Cineworld set to become top dog in North America as it makes move to buy Canada’s Cineplex for £1.6bn despite large debt pile

  • Cineworld has unveiled plans to become the biggest chain in North America
  • The deal to buy Cineplex is expected to add 165 cinemas and 1,700 screens
  • Analyst describes deal as ‘an extremely brave move’ given its debt levels

Cineworld has unveiled plans to become the biggest cinema chain in North America by buying Canada’s largest operator.

The UK-based chain has proposed paying 2.8billion Canadian dollars (£1.6billion) for Cineplex, which takes 75 per cent of box office sales in its home country. It will combine the business with its US arm, Regal.

The deal is expected to add 165 cinemas and 1,700 screens to Cineworld’s 9,500 screens across 786 sites.

The UK-based chain has proposed paying £1.6billion for Canada’s Cineplex

‘Cineplex is a great business. It is the number one cinema operator in Canada and is well positioned for further growth,’ said Cineworld chief executive Mooky Greidinger.

‘The combination of Cineplex and Regal will create the leading North American cinema operator with unrivalled scale and opportunity.’

The tie-up is set to create the biggest cinema chain in North America by the number of screens it operates.

It comes nearly two years since the company bought its US arm for around £2.4billion.

Cineworld jumped close to the top of the world’s biggest cinema operators when it bought Regal in February 2018.

That acquisition sent shares down, and they have not recovered since. On Monday shares fell 2.1 per cent to 201.7p.

‘The acquisition of Cineplex strengthens our belief in the theatrical business, one of the most affordable out-of-home forms of entertainment,’ said Mr Greidinger.

‘We constantly strive to provide the best customer experience and maintain technological leadership and we are excited about Cineworld’s prospects for 2020 and beyond as we look to complete the Cineplex transaction.’

The acquisition will still need to be approved by shareholders in the two companies, expected in the middle of 2020.

Cineworld chairman Anthony Bloom said: ‘The board of Cineworld believes that the acquisition of Cineplex is in the interests of its shareholders as it fits squarely within our strategic acquisition objectives and is expected to be strongly earnings and cash flow accretive.’

Russ Mould, investment director at AJ Bell commented:  ‘Making another large acquisition at a time when markets are already worried about debt levels is an extremely brave move by Cineworld.’

‘Its purchase in 2018 of US cinema chain Regal Entertainments raised many eyebrows because it meant the company would have very large debts for a number of years until it generated enough cash from operations to reduce borrowings to more comfortable levels.’

‘The number of short sellers – people betting on its share price falling – has been increasing this year, primarily over concerns about a weak film slate in 2019 and sky-high debt levels,’ Mould continued.

‘Therefore news that it is now buying Canada’s largest cinema operator, Cineplex, for US$2.1 billion would suggest management are very good at shrugging off market concerns or they don’t realise they are walking further into the lion’s den.’ 


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