Cineplex Awarded $1.24 Billion Judgment In Takeover Fight

In Cineplex v. Cineworld, the Ontario Superior Court awarded Cineplex $1.24 billion in damages after the U.K. company Cineworld walked away from an agreement to purchase Cineplex valued at over $2 billion. The case concerns the most significant deal to fail since the start of the pandemic, and adds to the recent case law on the interpretation of material adverse effect (MAE) clauses in Canada.

What you need to know

• Cineplex v. Cineworld concerns a transaction where the U.K. purchaser, Cineworld, refused to close a public M&A transaction involving a Canadian target in the context of the pandemic.
• The Court found that, once the pandemic hit, Cineworld wanted a way out of the transaction even though it had none. Notably, Cineworld had not negotiated for a break fee. It hoped that the seller, Cineplex, would default on its covenants. When it appeared Cineplex was not going to default on its covenants, Cineworld withdrew its application for regulatory approval