Cineplex (TSE:CGX) has agreed to buy 26 theatres from Empire Theatres for $200 million, the company said Thursday, with a chunk of them based in Atlantic Canada as a means to bolster its presence in the region.
Specifically, 13 of the theatres are in Nova Scotia, six are in New Brunswick, three are in Newfoundland and two are located on Prince Edward Island, while the two Ontario locations include Whitby and Kanata.
The deal will boost Cineplex's screen count by 218.
"This is a significant event for Cineplex, as the acquisition will provide our company with a truly national, coast-to-coast presence," said president and CEO Ellis Jacob, in the release Thursday. "This acquisition is an excellent strategic fit for Cineplex. It provides us with a presence in Atlantic Canada and it will enable us to leverage our existing businesses to maximize shareholder value."
Cineplex said it plans to invest in the acquired theatres, and add its UltraAVX auditoriums, VIP cinemas, and XSCAPE Entertainment Centres to certain locations. The theatres will also be rebranded under the Cineplex name.
According to the company statement, the 26 theatres had total revenues of approximately $113 million in calendar 2012. Cineplex has calculated that after reflecting synergies, the acquisition multiple on the transaction would be 8.0x adjusted EBITDA. It expects the deal to immediately add to earnings and adjusted free cash flow.
The deal, which still needs regulatory approvals, is expected to wrap up in about 60 days. Cineplex said it has funds under its existing credit facilities to finance the transaction, but it will continue to assess its options.
The company has also filed an Advance Ruling Certificate (ARC) to the Commissioner of Competition for the deal.
"We look forward to providing our future guests with an exceptional entertainment experience, including access to the SCENE loyalty program, our popular Front Row Centre Events and our interactive and mobile offerings," said Jacob.
Shares of Cineplex gained 3.3 per cent to trade at $36.19 as of 11:33am ET. Its stock has added more than 13 per cent so far this year. Last month, the company reported a decline of more than 41 per cent in its first quarter profit on a lack of blockbuster hits hurting box office revenues, though it announced a dividend increase of 6.7 per cent as the company continues to invest in premium priced formats.
It increased its dividend 6.7 per cent to $1.44 per share on an annual basis from the previous $1.35 per share. The increase was the third of its kind since Cineplex converted to a corporation in January 2011.