How COVID-19 Dethroned the Would-be King of the Israeli Cinema World

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People walk past a Cineworld cinema in Leicester Square in central London on October 4, 2020.
People walk past a Cineworld cinema in Leicester Square in central London on October 4, 2020. Credit: JUSTIN TALLIS / AFP
Yoram Gabison
Yoram Gabison

The year 2020 was supposed to end entirely differently for Mooky Greidinger, the Israeli CEO and controlling shareholder of Cineworld, the global operator of movie theaters. After it had agreed to acquire the Canadian cinema operator Cineplex at a $2.1 billion valuation, Greidinger was on his way to becoming the industry’s dominant player.

As it was, movie theaters were facing a serious challenge from streaming services like Netflix and Hulu; now the coronavirus pandemic is threatening the very existence of the global cinema industry. Greidinger is struggling these days to save the company that his grandfather, Moshe Greidinger, founded in Haifa in 1931 after arriving in Mandatory Palestine from Britain. Called the Ein Dor, it was Haifa’s first movie theater and from that small start, the family built a global empire. Cineworld today is the second-biggest player in the field worldwide. Today Mooky Greidinger and his brother Israel are CEO and deputy CEO, respectively, and control 28% of the stock.

On Monday, the company reported major progress in tiding it over the pandemic after it said it had secured more than $750 million of new financing, which it hopes will see it through the pandemic. “We look forward to resuming our operations and welcoming movie fans around the world back to the big screen for an exciting and full slate of films in 2021,” said Greidinger on Monday.

Like other theater operators, Cineworld is contending with the shuttering of the world’s movie theaters since the outbreak of COVID-19 last spring. Even in the cinemas that are open, attendance has been poor because moviegoers fear exposure to the virus.

Mooky Greidinger.Credit: Ilya Melnikov

Meanwhile, Hollywood has delayed releasing the blockbuster films, like the latest James Bond installment “No Time to Die,” that theater owners need to fill seats. The studios don’t want to lose money showing high-cost films to half-empty theatres. Even worse, some studios have decided to skip the cinemas altogether and take their films straight to streaming services – a decision that threatens to have long-term implications for the cinema business even after the coronavirus crisis ends.

As a result of the delayed releases, Cineworld last month closed about 660 theaters in the U.S. and Britain last month because of a lack of blockbusters as producers postponed releases because of the pandemic.

The group’s base-case scenario assumes a reopening of cinemas no later than May. In the event of a further delay, it said it expected to retain sufficient liquidity to remain in business for a number of months, but said that this might require support from lenders.

Despite the caveat, news of the new financing arrangements sent Cineworld shares soaring 18% to more than 54 pence (72 cents) in London.

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Cineworld operates 550 movie theaters in the U.S. under the Regal name with a combined 7,178 screens. In Britain, it has 128 theaters and 1,180 screens. In 2019, its last normal year of operations, they generated $3.85 billion in revenues and earnings before interest, taxes, depreciation and amortization of $1.4 billion.

But with the shutting of its theaters for three months in the spring and their only partial reopening afterward (200 in California and 11 in Israel have remained continuously closed since the outbreak), revenue plunged 67% in the first half of 2020 to just $712 million. Even before taking into account a $954 million depreciation, Cineworld posted $386 million in operating losses.

The family business grew slowly in its first decades. But in the 1980s, as a chain called Cinema City, the Greidingers opened the first multiplex theaters in Israel, and in the following decade expanded to Central and Eastern Europe. It floated shares in its Cinema City unit in Warsaw at a $350 million valuation.

The initial public offering gave the family the foundation for a global expansion. In 2014, the company entered the U.K. and Irish markets by merging with Cineworld and in 2018 became the second-largest movie theater operator in the world with the purchase of Regal for $3.6 billion.

Even with the cash to tide it over the next few months, however, Cineworld’s problems don’t start and end with the coronavirus because it entered the crisis heavily in debt.

The Regal deal has made many stock market investors nervous because it involved taking on $2.2 billion in debt at a time when the cinema business was saturated and feeling increased competition from streaming. Still, interest rates were at record lows and Cineworld climbed to a record $5.7 billion market cap in April 2019. No one could have predicted a disaster on the scale of the coronavirus.

Two months before the virus first began appearing outside of China, the company’s shares began a long-term expansion after it announced it was acquiring Cineplex, a move that would enable it to overtake AMC Entertainment as the world’s biggest cinema operator. Cineplex was supposed to be the last of the acquisitions Cineworld made as the Greidinger family built their global empire.

But Cineworld was already carrying $7.7 billion in debt and investors were anxious about new debt it would be taking on. Cineworld withdrew from the deal in June. Even so, it was becoming clear that the company couldn’t service the debt it already had.

With reporting by the Associated Press

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