Empire Company Announces Sale of Empire Theatres
STELLARTON, NS, June 27, 2013 /CNW/ - Empire Company Limited (the "Company") (TSX: EMP.A) has announced that Empire Theatres has reached a definitive agreement with Cineplex Inc. for the sale of 24 theatres and 170 screens in Atlantic Canada and 2 theatres with 48 screens in Ontario. Empire Theatres has also reached a separate definitive agreement with Landmark Cinemas for the sale of 20 theatres and 179 screens in Ontario and Western Canada.
Paul D. Sobey, President and CEO of Empire Company Limited stated, "The decision to sell the business of Empire Theatres was a very difficult one as it has a long history with our Company and is a great business with excellent employees who have worked hard over many years to build an attractive entertainment destination.
"The decision, however, aligns with the strategic direction of the Company to focus our resources on our food retail business through our 100 percent interest in Sobeys Inc. and on our related real estate investment through our 42.8 percent ownership interest in Crombie REIT."
The purchase price for the Cineplex transaction is $200 million to be paid in cash, subject to certain adjustments to be made at closing.
The purchase price for the Landmark transaction is approximately $55 million subject to certain adjustments to be made at closing, with the purchase price to be paid as follows: $31 million in cash on closing; $19 million in equity; and an earn out right which management estimates has a potential value of approximately $5 million. Upon closing, the assets will be held by a new entity with Empire Theatres' equity being the controlling interest. The new entity will be consolidated into the Company's financial statements, including $30 million of debt in the new entity. Landmark will manage the business and have a right to buy out Empire Theatres' equity interest for $19 million in cash until December 31, 2013, following which Empire Company can agree to sell its equity interest in the entity and require Landmark to sell on the same terms.
Closing of the transactions is subject to satisfaction of customary conditions and relevant regulatory approvals, which includes approval from the Competition Bureau. Closing of each transaction is expected to occur by late summer of 2013. Empire Theatres is not obligated to close either transaction without closing the other.
On closing, the Company expects to receive cash of approximately $216 million after adjustments and expenses, and intends to utilize these proceeds for debt repayment. The Company expects to record a net pre-tax gain on the two transactions of approximately $75 million.
This news release contains forward-looking information about the sale of Empire Theatres and use of expected proceeds. The forward-looking statements in this news release are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from current expectations, including those related to the business generally, which are set out in materials filed with the securities regulatory authorities in Canada from time to time, including the risk section of the annual Management's Discussion and Analysis report and Annual Information Form. No assurance can be given that these transactions will be completed, or the timing of any closing. Some of the factors that could affect the closing of the transaction include the need to obtain regulatory approval and satisfaction of other closing conditions. The value of the Company's remaining equity interest and in the earn out and its ability to realize on either may be impacted by market conditions and Landmark's ability to successfully operate the assets.
The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company other than as required by applicable securities laws.
Empire Company Limited (TSX: EMP.A) is a Canadian company headquartered in Stellarton, Nova Scotia. Empire's key businesses include food retailing and related real estate. With over $17 billion in annual sales and approximately $7.0 billion in assets, Empire and its subsidiaries directly employ approximately 47,000 people.
ABOUT EMPIRE THEATRES
Empire Theatres Limited is a Canada-wide film exhibition company providing an exciting out-of-home entertainment experience including traditional film exhibition as well as other content using its digital and satellite capabilities. Empire Theatres Limited is a 100 percent owned subsidiary of Empire Company Limited that owns and operates 50 theatres across Canada with 421 screens, including 7 IMAX theatres and 5 Empire Extra locations. Empire Theatres Limited's corporate headquarters are located in New Glasgow, NS, with regional offices in: Halifax, NS; Toronto, ON; and Calgary, AB. With approximately 2,500 employees, Empire Theatres provides excellent employment opportunities for the youth of Canada in an exciting and energetic industry.
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