IMAX had a rough week in the financial markets after the parent company IMAX Corporation failed to win the approval of shareholders of its subsidiary IMAX China to buy their shares and consolidate ownership globally.
Back in July, IMAX Corporation offered shareholders of IMAX China a significantly higher bid than the then-current price that its shares were trading at on the Hong Kong Stock Exchange. IMAX’s operations in China have struggled to recover from the effect of China’s zero-COVID policies which forced widespread theatre closures.
IMAX CEO Rich Gelfond characterized his company’s $124 million proposal to local shareholders as a “win-win”, with benefits for both sides. IMAX China’s shareholders would be able to cash out of their ownership for a greater price than the current market value while IMAX Corporation would unlock significant cost savings and tax efficiencies through its ownership.
However, a sufficient number of shareholders of the IMAX China subsidiary bet that the company’s stock price would rise to a level higher than the parent company’s bid. Somewhat unusual terms in IMAX China’s shareholder agreement make it so that only 10% of the voting shares can block any potential buyout.
In the end, 18% of shareholders voted against the buyout while 70% voted for it. The failed attempt was a black mark for both parent and subsidiary, with shares of the parent company falling by 12% while IMAX China’s share price dropped by 6%.
See also: IMAX China Falls After Buyout Is Voted Down (Wall Street Journal)