Imax Tussles With Canadian Investor Over China Buyout

variety.com:

Patrick Frater Asia Bureau Chief Canadian investment group Letko Brousseau & Associates and Imax Corporation have clashed over July’s proposed move to take private Imax China, which currently has a separate share listing in Hong Kong.

Letko, which owns some 1.7% of Imax China shares, on Friday announced that it will vote against the proposal. It argues that the offer “significantly undervalues Imax China” and “unjustifiably benefits Imax Corporation at the expense of minority investors.” Imax currently owns nearly 72% of Imax China stock and is offering HK$10 per outstanding share valuing the unit at $124 million. “The timing of the offer is opportunistic and comes as [Imax China] is beginning to emerge from the global COVID-19 pandemic that has kept a significant portion of its theatres closed over extended periods of time from 2020 to 2022, said Letko.

It said that the offer’s 39.5% premium to the prior closing price of Imax China shares “is based on a very depressed share price [and ] is less than 60% of what the shares were trading before the global pandemic. “The offer does not reflect Imax China’s historical level of profitability and its potential for strong earnings growth and cash flow generation going forward [.. ] it values [Imax China] at about 9x 2024 adjusted earnings, which is less than half of the company’s historical valuation and is unjustifiably low in our view given the strong recovery potential.” Imax China was floated on the Hong Kong stock market in 2015 at a price of HK$31 per share.

Imax hit back on Monday with a statement that suggested its offer was a remedy for recently poor investment returns and deteriorating stock market conditions. “While Imax China’s first half results are encouraging.