Empire Co. Ltd. is exiting the movie-theatre business as it narrows its focus on its grocery business after the recent deal to buy Safeway Inc.’s Canadian stores.
Stellarton, N.S.-based Empire said it has struck two separate deals to sell 46 movie theatres in Atlantic and Western Canada as well as Ontario.
In a $200-million transaction, Cineplex Inc. will acquire 24 Empire theatres in Atlantic Canada – 13 in Nova Scotia, six in New Brunswick, three in Newfoundland and Labrador and two on Prince Edward Island – and two in Ontario.
Meanwhile, Western Canada theatre operator Landmark Cinemas Inc. plans to buy 20 Empire locations in Ontario and Western Canada in an agreement valued at $55-million.
For Toronto-based Cineplex, the agreement broadens its national presence, with a foothold in Atlantic Canada.
Empire president and chief executive officer Paul Sobey said in a news release Thursday the decision to sell the movie-theatre division “aligns with the strategic direction of the company to focus our resources on our food retail business through our 100 per cent interest in Sobeys Inc. and on our related real estate investment through our 42.8 per cent ownership interest in Crombie REIT.”
Empire, the country’s No. 2 grocery chain, said it intends to use proceeds of about $216-million for debt repayment.
Ellis Jacob, president and CEO of Cineplex, said in a statement: “This is a significant event for Cineplex, as the acquisition will provide our company with a truly national, coast-to-coast presence.
“This acquisition is an excellent strategic fit for Cineplex. It provides us with a presence in Atlantic Canada and it will enable us to leverage our existing businesses to maximize shareholder value.”
Empire will have four theatres left, and two of those will be sold in real estate transactions, while a decision on what to do with the remaining two will be made when their leases expire later this year, Sobeys said.
Empire also said on Thursday that it posted fourth-quarter profit of $98.6-million, or $1.45 per share of adjusted earnings, up from $89.6-million, or $1.32, in the year-earlier period.
Sales reached $4.31-billion, up $235.1-million, or 5.8 per cent.
Empire said this month that Sobeys has struck an agreement with Safeway to buy all of its Canadian assets for $5.8-billion.
The deal includes 213 full-service grocery stores in Western Canada and 199 in-store pharmacies.
“Fiscal 2013 was a solid year,” Mr. Sobey said on a conference call Thursday.
Marc Poulin, president and CEO of Sobeys, said the current pricing environment is tough.
“We have to adjust prices to remain competitive in the marketplace,” he said on the call.
“Overall, we’re seeing a very competitive market where people are playing their promotional cards real hard,” he said.
Retailers are “trying to bring a surprise to market every week” in hopes of luring shoppers, said Mr. Poulin, adding that the environment is one of “fickle consumers and lots of square footage being added to the marketplace.”
Among the increasing competition are more food merchandising at Wal-Mart Stores Inc. and the arrival of Target Corp. in Canada.Report Typo/Error