Shares in Cineworld Group (CINE.L) sank nearly 40 per cent on Wednesday after a Canadian court asked the British cinema operator to pay C$1.23 billion ($957 million) to rival Cineplex as damages for abandoning a planned takeover.
London-listed Cineworld, the world’s second largest cinema operator, said it would appeal the ruling, which denied its counter-claim and includes an additional C$5.5 million for lost transaction costs.
The British company said it disagrees with the Ontario Superior Court’s judgement and does not expect damages to be payable to the Canadian company while any appeal is pending.
On Tuesday, Cineplex said the board was pleased with the judgement and would have no further comment during the 30-day period during which either party can appeal the decision.
The takeover deal, originally announced in December 2019, would have seen Cineworld become North America’s biggest cinema operator, but the British firm walked away from the $1.65 billion deal in mid-2020 citing breaches in the merger agreement by Cineplex.
Cineplex rejected those claims and accused the British company of avoiding its obligations under the agreement in light of the pandemic’s impact on the industry.
The litigation comes as cinema operators have been battered by the pandemic, with lockdowns shuttering theatres for much of the year and delaying movie releases at a time when the industry has been trying to stave off increased competition from streaming services.
Shares of Cineworld, which gets the bulk of its revenue from its Regal cinemas in the United States, fell as much as 40 per cent on the London stock exchange to hit one-year lows.
REUTERS