The Motley Fool

The Curtains Begin to Close on Empire Theaters

By Cameron Conway

Last week, Cineplex (TSX:CGX) announced that it completed its $194 million acquisition of 24 of the 50 theaters previously owned by Empire Theaters. These 24 theaters are located in Atlantic Canada, a territory previously left untapped by Cineplex. This now gives Cineplex complete coast-to-coast coverage across Canada with 161 theaters running 1,635 screens.

Cineplex received approval in the form of a No Action Letter from the Federal Competition Bureau on Oct. 10, after the FCB determined that since Cineplex had no previous locations in Atlantic Canada, it would not affect local competitiveness. But Cineplex was required to back out of two potential properties in Ontario (Kanata and Whitby) to address the requirements of the FCB.

“We have realized our vision of making Cineplex a truly national, coast-to-coast company,” said Cineplex President and CEO Ellis Jacob in a statement. “Atlantic Canadians are accustomed to a high standard of theatre entertainment, and our goal is to make it even better — with our SCENE loyalty program, Cineplex Tuesdays, and the many other benefits of Cineplex ownership.”

With the change in ownership, residents in Atlantic Canada should be prepared to see not only new signage but hopefully internal upgrades that would have UltraAVX and VIP Cinemas (which I quite enjoy) come to the Maritimes.

This marks the first of two curtain calls for Empire Theaters since the summer announcement by parent company Empire Company (TSX:EMP-A) that it would be divesting its cinema investments in order to give full priority to its core retail business, the grocery chain Sobeys.

The second curtain call will come with the completion of a deal that would see Landmark Cinemas purchase 22 of the 26 remaining Empire theaters. While Cineplex used this opportunity to gain new ground in Atlantic Canada, Landmark would also gain new territory in Western Canada and Ontario. This leaves four other locations that are expected to close unless smaller investors step in to purchase them.

While no doubt a difficult decision, investors should cheer Empire’s decision to divest — it can now focus on its “core,” and has some $255 million with which to pay down debt or reinvest in that core.

Three top stocks from The Motley Fool
Looking to expand your portfolio’s horizons? The Motley Fool has put together a Special FREE Report featuring “3 U.S. Stocks Every Canadian Should Own.” To get the names and ticker symbols of these three stocks, just click here to access your free copy!

Cameron Conway does not own shares in any of the above mentioned companies.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.