Following Up On The Cineplex Buy Of EK3

Gail Chiasson, North American Editor

We hadn’t been hearing anything about Cineplex Inc.’s digital signage business of late, and EK3 Technologies Inc. tends to work under the radar most of the time, so we have to admit that Cineplex’s announced offer to buy yesterday of digital signage company EK3 took us – and, I think, most people – by surprise.

logo cineplexThese are two significant companies, both based in Canada, and, in EK3’s case, operating both south of the border and in the EMEA. With Cineplex Inc., a public company, holding 136 theatres with close to 1,500 screens, it already holds an approximate 78% of the Canadian theatre market. Its Cineplex Digital Media has two divisions including the Media Plus Networks, a revenue sharing group which sells advertising as well as handling content, installation and more. It has such clients as Brookfield, Riocan, Cadillac Fairview and stadiums in Ottawa, Calgary and Edmonton. And its Cineplex Digital Solutions which handles creative, installation and more, has such clients as ScotiaBank, CIBC, SunTrust and Rogers.

For a company in the digital out-of-home sector, EK3 is a good size as well. With 145 employees, it operates in all 10 Canadian provinces and three territories; in 32 U.S. States; and in Ireland, England, Sweden, Spain, Denmark, Finland, Italy, Algeria and United Arab Emirates. Its clients have been no small potatoes either: McDonald’s, Coca-Cola, Disney, Apple, Walmart, Procter & Gamble, McCain’s, Tim Hortons, Target.

EK3 is probably best known of course for its excellent work with Tim Hortons – last year, this EK3 deployment was a deserved finalist at The DailyDOOH Gala Awards.

We mentioned to Pat Marshall, vice-president communication, Cineplex, that it was surprising to see several direct competitors within EK3’s portfolio (eg. Walmart and Target; Tim Hortons and McDonald’s; RBC Financial Group and BMO Financial Group).

“It speaks to the calibre of the work, the talents of the staff, the quality of its software and the relationships that it has developed,” says Marshall.

While EK3 will operate as Cineplex Digital Networks under Nick Prigioniero, EK3 president and CEO, mostly out of its offices in London (Ontario), Cineplex Digital Media will continue to be headed in Toronto by Fab Stanghieri, general manager, who is also senior vice-president, Real Estate & Construction – Cineplex.

“There are no plans to merge these two divisions in the short term,” says Marshall – We presume that means at least until after 2015, due to the financial arrangement of the buy – Ed.

“And there will be no attrition. We intend to keep the full staffs of both Cineplex Digital Networks and Cineplex Digital Media.”

As mentioned in our announcement yesterday, purchase price is $40 million with an earnout arrangement whereby EK3 has the ability to earn another $30 million, based on certain 2015 financial arrangements, and with an aggregate maximum purchase price of $78 million for both the initial and the earn-out payments.

It is expected that the takeover will give Cineplex a good platform for growth both in Canada and south of the border. It’s just a month ago that Cineplex said it would acquire 26 movie theatres from Empire Company Ltd. for $200 million in cash, extending its theatre base in Atlantic Canada and giving it full national coverage.

The Cineplex-EK3 deal, expected to close in two-to-four weeks following a period of due diligence, should give the whole industry more food to digest leading up to The DailyDOOH Investor Conference being held Oct. 23 and 24 during New York Digital Signage Week.

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