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Cineworld Group PLC’s chief executive was planning to sell off Cineplex Inc.’s The Rec Room and signage business in a secret initiative he called “Project Jumanji.”

The U.K. cinema chain’s head Moshe (Mooky) Greidinger testified Wednesday at the Ontario Superior Court of Justice that his company was looking to find buyers for the businesses because he wanted to focus on theatres and Cineworld didn’t have expertise in these other areas.

Mr. Greidinger called the digital sign venture and arcade and dining venues known as RecRoom “good businesses,” but said his company was drawing up documents and looking for buyers up until March, when “all hell broke loose” and COVID-19 spread.

“We understood [the sale] had to wait,” he said. “We understood we needed to run them for a while and after we’d sell them for a good price.”

Mr. Greidinger’s remarks are part of a multibillion-dollar court case that has seen his cinema company face off against Cineplex, the Toronto-based theatre chain it announced it would purchase for $2.8-billion in December, 2019.

Cineworld backed out of the deal to buy Cineplex Inc. in June, 2020, arguing it had the right to terminate the agreement without payment because Cineplex strayed from “ordinary course.”

Cineplex is seeking more than $2.18-billion in damages from Cineworld, which filed a counterclaim valued at about $54.8-million.

Cineworld claims it was out of the ordinary for Cineplex to defer its accounts payable by at least 60 days, reduce spending to the “bare minimum” and stop paying landlords, movie studios, film distributors and suppliers at the pandemic’s start.

But in September, Cineplex staff, including chief executive Ellis Jacob, testified the moves were normal for a company coping with the pandemic and pointed out that other entertainment businesses such as Cineworld acted similarly.

Cineplex has also alleged Cineworld was quietly planning to end the deal as early as March, 2020, well before it gave notice to Cineplex in June. The company further claimed that Cineworld drew out government approvals and sought financing that compromised the takeover.

Mr. Greidinger denied those assertions on Wednesday, but revealed that some of his staff had concerns about Cineplex keeping its debt below the agreed upon $725-million level.

Cineworld chief financial officer Nisan Cohen, he said, expressed doubts about Cineplex meeting the deal’s terms in March, which were further exacerbated when Star Wars: Episode IX – The Rise of Skywalker had a “disappointing” box-office performance.

Soon after, Mr. Cohen’s feelings were echoed by Israel Greidinger, Moshe’s brother and Cineworld’s deputy chief executive officer. Israel Greidinger monitored such doubts as theatres rapidly started to close around the world because of the spread of COVID-19. It was unlike anything he or his family, which has been in the theatre business since the 1930s, had ever seen.

“Mid-March was not an earthquake. Really the sky fell on us,” Mr. Greidinger said.

Yet, he was still committed to buying Cineplex, which Cineworld had been eyeing ever since it purchased Regal Cinemas in the U.S. in 2018. “I hoped that things would turn around and we’d do it,” Mr. Greidinger said. “But there were other problems on the other side that were slowly killing the deal.”

Mr. Greidinger maintains that he was in communication with Cineplex’s Mr. Jacob throughout the sale process, as government approvals were sought and as the deal’s closing date neared.

He said he was asked by Mr. Jacob to keep some human-resources plans confidential prior to the deal closing because he was worried they would cause “turbulences,” threaten government approvals or cause a large number of staff to leave.

While he and Mr. Jacob had different views about Cineplex’s digital sign and RecRoom ventures, Mr. Greidinger said he respected the businesses and “acted only in good faith.”

Cineplex has long been operating businesses that diversify its offerings beyond theatres because box office swings can be unpredictable and volatile and streaming options have proliferated the entertainment industry.

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