Q: Good Morning and Happy New Year !!
CGX used to be a market darling prior to Covid 19. Their long serving CEO is slated to retire in 2026. According to a BNN guest, the CEO's employment contract has a clause whereby he would receive a payment of $12 Million CDN if the company was sold prior to his retirement. Prior to the pandemic, Cineworld agreed to purchase Cineplex for $2.8 Billion. That of course fell through and CGX received a settlement of $1.23 Billion from Cineworld.
The BNN guest felt that CGX shareholders would fetch north of $30 per share if a transaction were to take place.
I just was curious as to your opinion of this situation ?
Thank you so much for all that you do. DL
CGX used to be a market darling prior to Covid 19. Their long serving CEO is slated to retire in 2026. According to a BNN guest, the CEO's employment contract has a clause whereby he would receive a payment of $12 Million CDN if the company was sold prior to his retirement. Prior to the pandemic, Cineworld agreed to purchase Cineplex for $2.8 Billion. That of course fell through and CGX received a settlement of $1.23 Billion from Cineworld.
The BNN guest felt that CGX shareholders would fetch north of $30 per share if a transaction were to take place.
I just was curious as to your opinion of this situation ?
Thank you so much for all that you do. DL
5i Research Answer:
Cineworld has has significant financial issues, though not technically bankrupt. But we doubt CGX will see any of its settlement money. With $2B in debt, CGX is a risky takeover for another entity. It is expected to make money (73c a share) this year. But its leverage and small size make it risky. Still, if an international player wants to 'own' the Canadian market, it would be an easy bite. It is just not something we would count on, nor invest just because of this possibility.