Cineplex and Cineworld entered into an Arrangement Agreement for Cineworld to acquire Cineplex for $2.8 billion.
Following the outbreak of the COVID-19 pandemic and mandated theatre closures, Cineplex deferred payments to landlords and suppliers to manage liquidity.
Cineworld terminated the agreement, alleging Cineplex breached the ordinary course covenant.
The court found that Cineplex's cash management measures were commercially reasonable and did not breach the agreement, noting that the pandemic risk was allocated to Cineworld under the Material Adverse Effect clause.
Cineworld's termination was a repudiation, and Cineplex was awarded $1.24 billion in damages for lost synergies and transaction costs.
