Cineworld PLC has been ordered to pay compensation for scrapping a US$2.1bn deal to buy Canadian rival Cineplex (TSX:CGX) when the Coronavirus (COVID-19) pandemic took hold in 2020.
In its judgment, The Ontario Superior Court ruled in favour of Cineplex (TSX:CGX), dismissed Cineworld's counter-claims and awarded the Canadian group damages of C$1.23bn (£725mln) for lost synergies and C$5.5mln for transaction costs.
Cineplex (TSX:CGX) started legal proceedings shortly after the deal was scrapped alleging a breach of good faith and claiming damages of US$2.18bn minus the value of shares retained by its shareholders.
The Canadian group said Cineworld pulled out because of “buyer’s remorse" due to the effects of the COVID-19 pandemic on its business.
Cineworld launched a counterclaim alleging it had terminated the deal because Cineplex (TSX:CGX) breached a number of its covenants and also sued for compensation, costs and financing costs.
In a statement, Cineworld said it disagrees with the judgment and will appeal, adding it does not expect damages to be payable while any appeal is ongoing.
Most of the cinemas owned by both chains were forced to close during the pandemic, which sent Cineworld deep into the red with debt soaring to around US$8.5bn
The UK group only reopened fully in July but said last month audiences were back up at 90% of pre-COVID levels in October as a string of blockbuster releases drew in filmgoers.