Imax has announced that it will not proceed with its planned acquisition of the outstanding stake in Imax China, following a shareholder vote that fell short of the required threshold.

Although approximately 70% of the shares voted were in favor of the acquisition, the “against” votes exceeded the 10% threshold mandated by Hong Kong law for the approval of a privatization transaction. About 61% of the total “disinterested” shares of Imax China common stock were cast in the vote. Imax China, a subsidiary based in Shanghai, is publicly traded on the Hong Kong Stock Exchange.

Imax CEO Rich Gelfond commented on the outcome, saying, “Even though our proposal received the vast majority of votes cast, and support from both leading independent proxy advisory firms, the vote did not achieve the threshold needed for approval.”

In July, Imax, which currently holds a 71.6% stake in its Chinese subsidiary, proposed to acquire the remaining shares for HK$10 (approximately $1.28) per share, totaling around $124 million. The offer represented a substantial 49% premium over the 30-day average closing price of Imax China, as stated by the parent company at the time. The acquisition was expected to bring immediate financial benefits through operational efficiencies and new growth opportunities. Prominent shareholder advisory firms ISS and Glass Lewis had recommended that shareholders vote in favor of the deal.

However, last month, Canadian investment fund Letko, Brosseau & Associates, holding approximately 1.7% of Imax China shares, expressed opposition to the acquisition. They argued that it undervalued the company and would primarily benefit Imax Corp. at the expense of minority investors.

Gelfond acknowledged the disappointment but emphasized the optimism for Imax China’s future, stating, “While disappointing, the vote demonstrates that shareholders believe, as we do, that the future of Imax China is bright. We are committed to our business in China, and our team will continue to create new growth opportunities for the Imax brand and technology in this vital market for blockbuster entertainment. Furthermore, we will explore opportunities to deploy the incremental capital intended for this transaction through alternate means of creating shareholder value, such as share repurchases of Imax stock.”

In pre-market trading, Imax shares are down by 1.87% at $19.45.