CMX Cinemas, the eighth-largest U.S. movie theater operator, has filed Chapter 11 bankruptcy only a month after it called off its proposed acquisition of Texas chain Star Cinema Grill.
CMX cited the economic crisis precipitated by the coronavirus pandemic that has shuttered theaters throughout the U.S.
“We are in a state of complete uncertainty as to when we can re-open our theaters and when our customers will feel safe and secure in returning to them given that there is presently no vaccine against the virus,” the U.S. subsidiary of Mexico’s Cinemex said in a statement. “We cannot forecast when — if ever — customer numbers will return to pre-crisis levels.”
The acquisition of SCG, which operates dine-in theaters, would have made CMX the seventh-largest U.S. theater chain. In terminating the deal, CMX said on March 26 that “in light of COVID-19 related fallout” it was not required to close the transaction.
The Chapter 11 filing came shortly before a hearing in SCG’s lawsuit seeking a court order that would compel CMX to close the deal. CMX has asked the bankruptcy court to impose an automatic stay on those proceedings.
“In a Chapter 11 it is hard to see how CMX could be compelled to go through with the SCG acquisition,” Celluloid Junkie noted.
Since entering the U.S. market in 2017, CMX has built a chain with more than 3,000 screens in 104 U.S. cities. In announcing the deal on March 16, it said the SCG acquisition was a “perfect fit” and would bolster its “robust expansion plans in the U.S.”
SCG filed its suit April 2, alleging CMX was using the coronavirus crisis as a pretext for backing out of the deal.
“Far from being unforeseen, the potential impact of the coronavirus was a significant factor discussed by the parties during their negotiation of the agreement,” the suit said. “There is no doubt that Cinemex entered into the agreement with its eyes wide open to the pandemic and its potential effects.”
Aaron Davidson/Getty Images for CMX Cinemas