Activist investor Windward Management has called on Canadian exhibition giant Cineplex to pursue share repurchases and assets sales to boost shareholder returns.
“Over the past year, we have had multiple meetings with the management team and have shared our views on value creation. While we believe we are generally aligned, we are frustrated by the absence of a sense of urgency exhibited by the company’s leadership,” Windward said in an open letter to Toronto-based Cineplex made public on Monday.
Windward, which owns around 7 percent of the fifth-largest movie theatre chain in North America and the largest circuit in Canada, saluted Cineplex for navigating an ongoing recovery from the impact of the pandemic and the 2023 Hollywood strikes on its business. “Cineplex’s prudent decisions to monetize one-third of its Scene+ loyalty program stake for $60 million during the depths of COVID, divest non-core assets for $155 million at the end of 2023, and refinance its debt ensured the company could survive at a time when several other exhibitors went bankrupt,” the activist shareholder wrote.
Ellis Jacob, Cineplex president and CEO, on Monday reacted to the overture from Windward in a statement by indicating “we welcome input from all our shareholders,” while adding “we are managing our capital prudently, as we have navigated five challenging years, while acting in the best interest of all stakeholders to maximize long-term value.”
Windward asserted Cineplex could do more to boost value creation, including repurchasing 55 percent of its current market capitalization and exploring the sale of its digital media business and a 33 percent stake in the Scene+ loyalty program, “which could yield proceeds of $220 million, or 33 percent of its current market capitalization.”
Windward, which previously urged other publicly-listed companies like Groupon and Netgear to explore strategic alternatives, in a presentation called on Cineplex to leverage a Hollywood box office recovery heading into 2026 and beyond to generate “significant cash.”
“We believe we are at an inflection point in film exhibition. As outlined in our presentation, we believe the film slate from second half 2025 to 2027 will reignite the box office … We expect 2027 to be sequentially stronger than 2026, further bolstering the recovery,” the Cineplex bull wrote.
Jacob in his own statement agreed “the exhibition industry is at an inflection point and we are optimistic about Cineplex’s future.” But the Cineplex boss indicated his company would stay the course with its current capital allocation strategy and stance on asset sales, “which includes maintaining a strong balance sheet with leverage within a stated target range and opportunistically repurchasing shares through our recently renewed NCIB. As we have always said, we will continue to review any accretive opportunities to divest non-core assets.”
Noting that Jacob is set to retire by the end of 2026, Windward forecast a possible takeover of the Canadian exhibition giant in the future. “It’s our view that a takeout is not only possible, but likely, given Cineplex’s attractive market position, the industrial logic behind consolidation, diversified business model, and the magnitude of synergies realized in a combination,” the activist fund run by Marc Chalfin said in its presentation.
