Canada’s largest exhibitor Cineplex has begun exploratory talks to find a buyer for the company. According to reporting from Bloomberg, Cineplex has held initial discussions with both Regal and Cinemark to discuss the potential for a merger or outright sale. Two key factors may be prompting the exhibitor to seek an off ramp from going it alone. First, the company’s long-serving CEO Ellis Jacobs has announced plans to retire from his position at the end of the year, forcing a change in management that could be disruptive. In addition, the uneven box office recovery over the past several years has put most North American circuits under significant financial pressure.
In 2019, Regal’s parent company Cineworld settled on a deal to acquire Cineplex for $2.1 billion, but later reneged in the face of massive disruptions caused by the COVID pandemic. In the end, Cineworld was forced to pay Cineplex more than $950 million in penalties for backing out of the agreement. These funds were a critical support for Cineplex to offset its dramatic losses in 2020 and 2021.
Since then, Cineplex has continued to struggle with inconsistent attendance and revenues. Recent moves would seem to show that the company is once again positioning itself for a sale. Notably, they sold off their digital signage division last fall for approximately $70 million, removing a non-core asset from the company’s operations and reducing its debt load. Any other large exhibitor such as Regal or Cinemark may be more interested in a pure-play cinema business without having to take on ancillary assets. Any sale of Cineplex would result in a dramatic change to the landscape of North American cinemas, with their network comprised of over 150 theatres across Canada and nearly 2,000 movie theatre screens.
