Drabinsky’s Bid to Buy 30% Stake in Cineplex Collapses

Cineplex Chairman Garth H. Drabinsky’s bid to take control of the Canadian movie theater concern suffered a setback Thursday with the collapse of a deal to buy a 30% stake from the powerful Charles R. Bronfman clan.

The Bronfmans had agreed to give a Drabinsky-led group until May 3 to buy the family’s holdings, but a source familiar with both groups declared: “That deal is over.”

The development came on a day of public skirmishing among Cineplex’s three prominent factions. MCA Inc., the largest shareholder, threatened to sue three Bronfman representatives on the Cineplex board as well as Drabinsky and three allied directors--on grounds not disclosed.

A few hours later, the Bronfmans and the Drabinsky group appeared to retreat, telling the Quebec Securities Commission that they were not prepared to conclude their agreement, which would require the commission’s approval.

If the deal had gone through, Drabinsky would have controlled more than 34% of the common shares and had an upper hand over MCA, which is limited to a 33% voting stake although it holds nearly half of Cineplex’s stock.

Few Clues Emerge

MCA had accused Drabinsky of trying to avoid making a tender offer to all shareholders and urged the Cineplex board to appoint an independent committee to weigh the deal and determine whether the board should seek outside bids.

Directors of the embattled company gathered Thursday in Toronto for a meeting that promised to be tense. By evening, however, there were few clues about the session’s progress or whether, in fact, the full board was meeting. Cineplex spokeswoman Lynda E. Friendly said she would not comment on any aspect of Cineplex’s affairs.

Earlier in the day, Cineplex issued a statement saying it had received written notice from MCA announcing its plan to try to sue the Bronfman and Drabinsky groups’ representatives on the board on behalf of Cineplex.

Cineplex said it was unaware of any grounds for the legal action and said the company would resist “if and when it is brought.”

The stage for a nasty legal battle was set last week when MCA sought an injunction against the Drabinsky-Bronfman deal in an Ontario court. In that proceeding, an MCA vice president said MCA and Bronfman representatives on the Cineplex board had been “extremely critical” of management’s financial reporting practices. No details were provided, however.

The Bronfmans and Drabinsky group have twice sought permission from the Quebec Securities Commission to transfer the Cineplex shares but were turned down. The commission said the deal would be detrimental to investors and insisted that any new proposal be submitted for fresh review. On Wednesday the Bronfmans and Drabinsky group tried a third time.

A public hearing set for today was canceled because “the Bronfman and Drabinsky groups informed the commission they weren’t ready to conclude an agreement,” the commission said.

Details of the third proposal were not made public, but it reportedly involved about 6.5 million Cineplex shares, or 27% of the outstanding common stock.