Is The Movie Business Still Viable? Cineworld Bets $1.65 Billion On Its Longevity

In a $1.65 billion cash deal, cinema operator Cineworld (CINE.L) will reportedly purchase Toronto-based Cineplex (CGX.TO), making it the largest movie operator in North America.

The purchase is part of an effort by Cineworld to better compete against online streaming services, such as Netflix (NFLX) and Amazon (AMZN) Prime, that often make movies available shortly after their cinema release or directly to the streaming platform, creating strong competition for the movie operator, Reuters reported.

As part of the deal, Cineworld also said it will secure $2.3 billion in loans with Cineplex being valued at $2.1 billion, including its debt. Cineworld had adjusted net debt of $3.3. billion as of June 30, which the company said it was looking to reduce through capital allocation for a net debt to EBITDA ratio of three times by the end of fiscal 2021.

Through its acquisition of Cineplex, Cineworld reportedly adds 165 cinemas and 1,695 screens to its already 9,498 screens at 786 locations. The purchase also helps to grow Cineworld’s presence in Canada, where it already has 75% of the market share, Reuters reported. The Canadian movie market grossed $770 million in 2018,

“Our immediate post-acquisition objectives will be to combine Cineplex with our U.S. business,” Anthony Bloom, Cineworld Chairman, said.

This is not the first acquisition for Cineworld, which purchased Regal cinemas for $3.6 billion nearly two years ago. Cineworld became the world’s second-largest theater operator by screens with the purchase.

Shares of Cineworld were up 3.01% as of 9:55 a.m. EST on Monday while shares of Cineplex were up 41.61% at the same time. Shares of Netflix stock were up 0.50% and shares of Amazon were also up 0.04% at the same time.