This week, the Wall Street Journal reported that Cineworld and Cineplex had begun a new round of talks on their contested merger. The original deal was announced with much fanfare in 2019, only to fall apart bitterly in 2020 amidst the turmoil of the pandemic.
This time, the terms being discussed are quite different with Canadian-based Cineplex acquiring Cineworld’s U.S.-based Regal Cinema locations. This would make Cineplex the largest exhibitor in North America, a dramatic re-alignment in the world’s largest theatrical market.
It makes sense for Cineworld to offload Regal as it pursues debt relief through its bankruptcy process. As part of its filings this week to the bankruptcy court, Cineworld projected that the North American box office will recover to 2019 levels before 2025, in large part because of studios releasing fewer movies to theatres.
While the global box office has shown positive signs of recovery in 2022, Cineworld’s projection of a slow recovery will not allow the exhibitor to generate enough revenue and profit to be able to pay off the remaining debts it emerges with from its bankruptcy. By starting with a stronger financial position, Cineplex should be able to reach profitability more quickly while the theatrical market slowly recovers.