At the pre-takeover share price of $24.01, I believe Cineplex is significantly undervalued. Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group. The entertainment brands revealed in mid-December that they had signed a deal where Cineworld agreed to assume Cineplex’s debt and pay $34 per share in cash, amounting to a 42 per cent premium on the Toronto-based chain’s closing price at the time of the announcement. This report by The Canadian Press was first published Feb. 11, 2020. This is a space where subscribers can engage with each other and Globe staff. The Zero Canada Project provides resources to help you manage your health, your finances and your family life as Canada reopens. Cineplex says it intends to apply for a final order from the Ontario Superior Court of Justice to approve the transaction next Tuesday. However, as companies everywhere struggle to deal with the impact of the new coronavirus on their finances, the two theatre chains face unexpected challenges. At the end of 2019, Cineplex owed lenders $625-million. Further, the company reports cash and equivalents of $30 million on short-term debt of $112 million. The issues are being broadcast by investors such as Hindenburg Research, which is betting that the takeover fails or is at least reworked. The company’s share price closed at $24.01 on Friday December 13, 2019, before opening at $34.02 after the release of news regarding the takeover. The deal had a go-shop period, allowing Cineplex to entertain other offers. Cineplex's takeover by U.K.-based Cineworld approved by shareholders Cineplex Odeon Theater at Yonge and Eglinton in Toronto on Monday December 16, 2019. Essentially, investors are getting a better deal than Cineworld. I believe this is a very good deal for shareholders, as the takeover offer is more than the halfway point between the last closing price and the intrinsic value. Star Newspapers Limited and/or its licensors. Non-subscribers can read and sort comments but will not be able to engage with them in any way. However, no offer materialized amid other spending priorities in the telecom space, such as spectrum auctions. Assuming less-than-average industry growth, the intrinsic value would be $37.67 per share, and higher-than-average industry growth would result in an intrinsic value of $43.74 per share. Click here to subscribe. If you are looking to give feedback on our new site, please send it along to, To view this site properly, enable cookies in your browser. Thank you for your patience. Pre-tax income is strong at $41 million (although down from $67 million in 2018). If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Cineplex chief executive Ellis Jacob deserves credit for negotiating what seemed an air-tight takeover back in December. As online streaming services put pressure on traditional movie theatres, investors have the perfect opportunity to get out ahead. I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. That means: Comments that violate our community guidelines will be removed. I understand I can unsubscribe from these updates at any time. Officially, Cineworld and Cineplex say they remain committed to tying the knot, on the agreed terms. Cineworld struck the takeover deal for Cineplex long before COVID-19 had rattled the movie industry. All I'm a print subscriber, link to my account, Avoid the use of toxic and offensive language. expressly prohibited without the prior written consent of Toronto Cineplex (TSX:CGX) is one of Canada’s largest entertainment organizations, with theatres and location-based entertainment venues in 10 provinces. For its part, Cineplex pledged to keep its debt below $725-million as a condition of the takeover. If Cineplex breaks the deal, it owes its potential buyer $55.4-million. He also did not share what he planned to do with Top Golf, a virtual reality golfing concept Cineplex is due to bring to Canada. The massive gap between what Cineworld is offering and where Cineplex stock is trading reflects growing concerns over whether the deal gets done. Fool contributor Chen Liu has no position in any of the stocks mentioned. permissions/licensing, please go to: www.TorontoStarReprints.com. Some information in it may no longer be current. The transaction is expected to be completed in the first half of 2020, after which time its shares would be delisted from the Toronto Stock Exchange. When it announced its discussions with Cineworld, shares shot up to about $33 and have hovered there ever since. Not to alarm you, but you’re about to miss an important event. Cineplex Inc. has agreed to a friendly takeover deal that values the operator of Canada's largest chain of movie theatres at $2.8 billion, including … Welcome to The Globe and Mail’s comment community. If this takeover does fall apart, each chain has agreed to significant payments. Find out how you can access the NEXT Shopify today! Cineplex is a dividend-paying entity with a dividend yield of 7.5% pre-takeover. Cineworld warns it could fail to meet debt commitments in worst-case coronavirus scenario, Major Cineworld shareholder sells partial stake as coronavirus hits theatre operators, Cineplex shares tumble on short-seller’s view that deal with Cineworld could fall apart or be reduced, Unchecking box will stop auto data updates, Due to technical reasons, we have temporarily removed commenting from our articles. 351 King Street East, Suite 1600, Toronto, ON Canada, M5A 0N1, Just $1.99 per week for the first 24 weeks, var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o? 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Would like to write a letter to the Globe and Mail Inc. all rights reserved direct! Life as Canada reopens $ 18 a month for unlimited movie tickets community guidelines will be removed 77 per since... Ellis Jacob deserves credit for negotiating what seemed an air-tight takeover back in December did! Launched the takeover deal closing theatres and 1,695 screens to that count Cineworld chief Ellis. S borrowing rises about this level Cineplex has faced stiff competition for ’. 'M a print subscriber, link to my account, Avoid the use of toxic offensive! Is for your personal non-commercial use only Superior Court of Justice to approve the transaction Next Tuesday should be...

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