(MENAFN- Baystreet.ca)
England's Cineworld Group PLC is acquiring Canada's Cineplex Inc. (TSX:CGY) for $2.15 billion, creating the largest movie theatre chain in North America.
Cineworld will pay $34 a share for Cineplex, a 42% premium to the Canadian company's closing share price of $24.01 on Friday. The deal will be funded by $2.3 billion of loans, the companies announced.
Shares of Cineworld were down 3.3% in London trading Monday, its biggest intraday drop in about two years. Analysts at Citigroup Inc. said that while the deal makes sense, Cineworld's debt will remain high after the acquisition is finalized.
Movie theatre operators have been combining to squeeze costs so they can afford facility upgrades and counter the risk that on-demand services such as Netflix Inc. will hit attendance. Bigger chains can also have a stronger bargaining position in negotiation with studio giants such as Walt Disney Co., which have also been growing through acquisitions.
The takeover of Cineplex, which operates 165 movie theatres across Canada, continues a push by London-based Cineworld into North America. It follows the company's $3.6-billion purchase of American operator Regal Entertainment Group in 2018, targeted at broadening its growth opportunities beyond the U.K. and Ireland.
The British group now derives almost three-quarters of its revenues from North America.
Cineplex shares closed Friday at $24.01.
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