MCA Threatens to Sue Bronfmans in Battle for Cineplex

As the directors of embattled Cineplex Odeon gathered Thursday in Toronto for a board meeting that promised to be tense, new skirmishing broke out among the three prominent factions struggling to shape the movie theater concern’s future.

MCA Inc., the largest shareholder, threatened to sue representatives of the powerful Bronfman clan who revived efforts to sell privately a 30% stake to Cineplex Chairman Garth H. Drabinsky and certain associates. MCA indicated that it would also name Drabinsky and three allied directors in its suit.

A few hours later, the Bronfmans and the Drabinsky group appeared to retreat, telling the the Quebec Securities Commission that they were not prepared to conclude their agreement, which would require the commission’s approval. If the deal goes through, Drabinsky will control more than 34% of the common shares and have an upper hand over MCA, which is limited to a 33% voting stake although it holds nearly half of Cineplex’s stock.

MCA has accused Drabinsky of trying to avoid making a tender offer to all shareholders and urged the Cineplex board to appoint a committee “made up of directors having no interest in the proposed transaction” to weigh the deal and determine whether the board should seek outside bids.

There were few clues Thursday evening, however, about the progress of the board meeting, which was expected to begin in the late afternoon. Cineplex Executive Vice President Lynda E. Friendly said she would not comment on any aspect of Cineplex’s affairs.

Notified Firm

If MCA prevails in the formation of a committee, its five representatives on the Cineplex board would outnumber the four remaining directors who are not involved in the proposed Drabinsky-Bronfman transaction.

Cineplex, in a prepared statement, said it had received written notice that MCA intended to apply for permission to file suit on behalf of Cineplex in the Supreme Court of Ontario against Drabinsky and three other directors who have joined him in the effort to acquire a controlling block of stock from the Charles R. Bronfman family. The other three directors identified as potential defendants in the suit are Bronfman representatives on the Cineplex board.

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 Bronfmans have submitted two previous proposals for the transfer of Cineplex shares to the Drabinsky group, only to be turned down by the Quebec Securities Commission. Late Thursday, the commission said it would cancel a public hearing today regarding a third proposal because “the Bronfman and Drabinsky groups informed the commission they weren’t ready to conclude an agreement.”

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