CA - Cineplex looks into reviving merger with Regal following Cineworld bankruptcy: report

Canadian movie theater and family entertainment company Cineplex ( OTCPK:CPXGF ) ( TSX: CGX:CA ) has spoken to lenders of bankrupt rival Cineworld ( OTCPK:CNNWQ ) ( OTCPK:CNWGQ ) about acquiring its Regal Entertainment franchise, owner of the number 2 movie theater chain in the U.S., The Wall Street Journal reported .

The news outlet, citing people familiar with the matter, noted that Cineplex ( OTCPK:CPXGF ) ( CGX:CA ) has had early talks with Cineworld's ( OTCPK:CNNWQ ) ( OTCPK:CNWGQ ) lenders on taking over Regal and in return, giving the lenders debt and stock backed by the deal.

AMC Entertainment ( AMC ) ( APE ) is the largest movie theater chain in the U.S. and has approximately 1,000 theaters and 11,000 screens around the world.

Cineplex ( OTCPK:CPXGF ) ( CGX:CA ) would need a wide swath of lender support for the deal and Cineworld ( OTCPK:CNNWQ ) ( OTCPK:CNWGQ ) does not have a clear path after it filed bankruptcy earlier this month, with roughly $5B in debt.

The UK-based company filed for Chapter 11 bankruptcy protection in Texas, a move well signaled as the chain wrestled with a debt pile that amounted to $5B and recent box office that has slowed dramatically from a summer spike.

Cineworld and its units enter Chapter 11 with commitments for $1.94B in debtor-in-possession financing, it said.

Cineworld added that it expects to emerge from protection during the first quarter of 2023, and it's "confident that a comprehensive financial restructuring is in the best interests of the Group and its stakeholders, taken as a whole, in the long term."

The Journal added that a deal between the two companies has been tried before, as Cineworld ( OTCPK:CNNWQ ) ( OTCPK:CNWGQ ) agreed to acquire Cineplex ( OTCPK:CPXGF ) ( CGX:CA ) in 2019 for roughly $3B, but then COVID-19 pandemic disrupted the global box office and forced the companies to walk away from the deal.

Cineplex ( OTCPK:CPXGF ) ( CGX:CA ) is being advised by investment bank Moelis & Co., which is looking to build support for the deal among Cineworld's lenders.

Earlier this month, RBC Capital Markets upgraded Cineplex ( CGX:CA ) as it saw an attractive entry point following a pullback for the Canadian movie-theater chain's shares .

Seeking Alpha's Jason Aycock contributed to this story.

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