Carmike’s largest shareholder continued today to rally fellow investors to oppose its $1.1 billion (including debt) sale to AMC Entertainment.
Mittleman Bros. Managing Partner Chris Mittleman charged the exhibition chain with trying to “obfuscate the relativity low” valuation in the deal in a letter to CEO David Passman and Chairman Roland Smith filed at the SEC. The investor, who has about 7.1% of Carmike’s shares, also says that the company showed “poor negotiating tactics” in accepting AMC’s offer of $30 a share.
Mittleman says he plans to vote against the plan and urge others to do the same. But “at this time” he does not plan to solicit proxies to fight the company.
While the investor likes the idea of combining AMC and Carmike, he says the No. 2 chain should have paid at least $35 a share in stock or $40 in cash for Carmike.
Carmike declined to comment on the new letter. Earlier this month it said that the board unanimously approved the deal “after thoughtful consideration of the options available to the Company, including the level of interest from other third parties and the value potential of Carmike’s standalone plan. Carmike did not receive any offers that provided greater value than AMC’s $30 per share offer.”
Mittleman notes that the deal, announced on March 4, was hammered out while the stock market “was in the throes of a significant correction. … Not a great time in which to be trying to sell your company for the highest possible price.”
What’s more, he says that Carmike was working out terms at the same time it was preparing to unveil on February 29 its strong earnings for the last three months of 2015.
“Why not wait until the earnings report was released to see how the stock reacted before establishing a buyout price?” Mittleman asks. The three-day interval between the earnings and deal announcements didn’t give investors enough time to “digest the stronger than expected numbers and adjust expectations.”
“It seems to us almost as if Carmike wanted to set the price and get the takeover news out quickly before the stock price got to $30 on its own, thus collapsing the putative takeover ‘premium,'” Mittleman writes.
The investor also says that a filing Carmike made defending its valuation in the AMC deal seemed to change its definition of adjusted EBITDA, a measure of cash flow.
“Carmike shareholders should not be lulled into a false sense of satisfaction due to what we believe amounts to a numerical sleight of hand in an attempt to put what we see as a very poor deal into a good light,” Mittleman says.
Using a definition that he considers more appropriate, and including the value of Carmike’s 20% stake in Screenvision, would make the agreement with AMC “one of the cheapest buyouts of a major theater chain in recent memory.”