Cineplex Inc. says its digital signage unit will get a good platform for growth in Canada and south of the border through the theatre company’s proposed friendly takeover of EK3 Technologies Inc., announced Wednesday.
EK3 of London, Ont., has operations in 32 U.S. states, as well as Canada and other countries, that provides in-store digital advertising signs. Its clients include Tim Hortons Inc., McDonalds, Wal-Mart, Target Corp., and the RBC and BMO financial groups.
Toronto-based Cineplex says it has made a conditional offer to buy EK3. It will pay about $40-million up front plus the potential for performance-related payments that could push the total to $78-million.
Cineplex has been gradually expanding its role in the media business by showing advertising to theatre-goers before movies begin as well as getting into digital signage, a relatively new and growing part of the industry.
“This is a business that is really ramping up, and you know, both EK3 and CDS [Cineplex Digital Solutions] have been growing our own infrastructure in order to handle this growing market,” said Gord Nelson, Cineplex’ chief financial officer.
“I don’t think you should look at this from a cost synergies perspective. This is more about taking advantage of revenue opportunities.”
The deal requires acceptance by holders of 97 per cent of EK3’s shares and other conditions but Cineplex says it expects the transaction to close within four weeks.
Cineplex says the company will be renamed and operate as Cineplex Digital Networks, under the leadership of EK3 president and CEO, Nick Prigioniero.
Last month, Cineplex said it will acquire 26 movie theatres from Empire Company Ltd. for $200-million in cash – 24 in Atlantic Canada and two in Ontario – giving it true national coverage.
The Empire deal will give Cineplex 78 per cent of the Canadian movie theatre business, as well as a presence in Canada’s four most eastern provinces – one of the few areas of the country where it didn’t have a major presence.
Shares of Cineplex were up 29 cents to $38 on the Toronto Stock Exchange at noon on Wednesday.