Cineworld’s Share Price Leaps 23% On Vue Takeover Speculation

Embattled cinema chain Cineworld has seen its share price rocket on Monday on reports of a possible takeover bid by industry rival Vue International.

At 5.2p per share the leisure stock was last trading 23% higher in start-of-week business.

Sky News reports that two funds managed by Barings and Farallon Capital Management have agreed to provide Vue with cash in order to pursue acquisitions.

It adds that City sources say Vue will now submit a bid for Cineworld later this week. This is an accordance with a deadline set by the latter’s advisers.

Vue is the largest privately-owned cinema chain in Europe. It owns 227 sites with nearly 2,000 screens spanning the UK, Ireland, Taiwan and several mainland European countries including Germany, Italy and Poland.

On The Chopping Block

In early January Cineworld squashed rumours that either it or its advisers had opened talks with US industry giant AMC EntertainmentAMC
to sell any of its cinema assets.

But the company did say it would kick off a marketing process for its assets that could also involve the sale of the entire group. It added that it would begin reaching out to potential buyers later in the month.

Cineworld is the second-largest cinema chain on the planet with 747 theatres boasting a total of 9,139 screens. It acquired Regal Entertainment in a $3.4bn deal back in 2018 which took it into the US but also loaded its balance sheet with debt.

This left the company vulnerable following the Covid-19 crisis that forced its theatres to close.

The onset of the pandemic also forced the UK chain to abandon its planned takeover of Canada’s Cineplex, a decision for which Cineworld has been ordered by Ontario’s Supreme Court of Justice to pay C$1.23bn in damages. Cineworld has appealed the decision.

Disappointing Trading

Cineworld filed for Chapter 11 bankruptcy protection in the US last September on the back of its high debts and disappointing recent trading since its cinemas reopened.

In its latest trading update around then Cineworld said that ticket sales during the third quarter had been disappointing. The company said that this was “primarily due to a limited film slate that is anticipated to continue until November 2022.”

However, Cineworld also said that box office sales were likely to sit below pre-pandemic levels in both 2023 and 2024. This is despite a stronger schedule of blockbuster releases being in place for the next two years.

Cineworld’s share price has collapsed almost 90% during the past 12 months.