By, Lilian Jin
Canada’s largest movie chain has agreed to be acquired by the UK chain Cineworld for C$2.8 billion, pending shareholder approval. As Cineplex faces declining attendance and stiff competition from streaming services, what will the takeover mean for Canadians?
On Monday, December 16, 2019, U.K. giant Cineworld Group PLC offered to buyout Cineplex Inc. at C$34.00 per share, a 42.0% premium over its C$24.01 closing price the previous Friday. Following the announcement, Cineplex shares rose to C$33.96 on the Toronto Stock Exchange, slightly below Cineworld’s offer.
Cineworld was founded 25 years ago, went public in 2007, and has now become the world’s second largest cinema chain by number of screens. The global chain operates in the UK, Ireland, Poland, Israel, and recently in the US after acquiring the American chain, Regal Cinemas, in 2018. Today, Cineworld runs 9,500 screens in 786 locations, and with Canada’s 165 Cineplex theatres, the chain will be the largest in North America.
Although Cineplex has 75.0% market share of the Canadian box office, it has been struggling in a changing entertainment industry with competitors like Netflix, Crave, and most recently, Disney Plus. From 77 million seats filled in 2015, to 69.3 million seats in 2018, Cineplex has been facing declining attendance. This performance is reflected in its share prices which have fallen from the C$50.00’s in 2017 to the C$20.00 range (prior to the buyout announcement).
In response to their under performance, Cineplex has been trying to rebrand itself from a movie chain to an entertainment company in recent years. Their efforts have included expanding premium experiences such as VIP and 4DX cinemas, food and alcohol offerings, and growing its restaurant and amusement segment like The Rec Room, Playdium, and Topgolf Canada.
According to Sam La Bell from Veritas Investment Research, Cineworld is expecting to produce cost savings of US$130 million following the acquisition, which could involve changes in Cineplex’s current asset mix. What does that mean for Canadian movie watchers?
CEO, Moshe Greidinger, plans to bring Cineworld’s Unlimited movie pass to Canada. The concept has been proven successful in Cineworld’s existing markets, allowing moviegoers to watch as many films as they like at the cinema for a monthly fee. Pass holders will receive additional perks like reserved seating, food discounts, and access to advance screenings.
Cineworld rolled out its Unlimited pass in US based, Regal Cinemas, with monthly prices ranging from US$18.00-23.00, based on how many theatres are included. Cineplex’s current general admission tickets are priced at $13.99, with premium experiences costing as much as $24.99. Greidinger explains that the Unlimited pass will allow customers to upgrade more easily to 3D or 4DX tickets “because the upgrade fee feels smaller once the pass is already paid for”.
With increasing pressure from streamers to shorten the time period for new movies to become available on streaming platforms, cinemas are struggling to hold on to their exclusive screening rights. Cineworld’s immense size will give it more bargaining power with film studios to maintain their time window and offer an unlimited cinema experience that can’t simply be replaced at home.
Featured image by Krists Luhaers.