Cineworld shares plunge as Canadian court tells them to pay up £720 million

The cinema chain has been ordered to pay damages after pulling out of an agreed takeover by Canadian rival Cineplex.

Cineworld has been ordered to make a payout by a Canadian court (Gareth Fuller / PA) (PA Archive)

Cineworld shares plunged nearly 30% on Wednesday after the cinema chain was ordered to pay 1.23 billion Canadian dollars (£720 million) by a court.

The payout was ordered after the chain was taken to court by jilted Canadian rival Cineplex following a decision by Cineworld not to go through with a takeover.

Cineplex alleged that Cineworld breached its obligations under their agreement and its duty of good faith after the deal was scrapped.

Cineworld had agreed to the takeover before the pandemic but cancelled it as lockdowns closed cinemas around the globe.

Cineworld suffered during the pandemic as cinemas closed (Yui Mok / PA) (PA Archive)

The Canadian firm claimed damages of up to 2.18 billion Canadian dollars (£1.28 billion), less the value of Cineplex shares retained by Cineplex shareholders.

But Cineworld argued that it had terminated the agreement because Cineplex breached a number of its covenants, leading to a counter-claim.

However, the Ontario Superior Court of Justice ruled in favour of Cineplex and dismissed Cineworld’s claim.

The company said: “Cineworld disagrees with this judgment and will appeal the decision. Cineworld does not expect damages to be payable whilst any appeal is ongoing.”