One of Carmike’s biggest shareholders says it might go to court if AMC Entertainment tries to win the No. 4 theater chain by increasing its offer by $3 to $33 a share and they allow recent investors to vote.
Mittleman Bros, which owns 9.6% of Carmike, says it still would oppose such an offer at a shareholder vote postponed this morning to July 25. Carmike and AMC said the second delay in the meeting originally scheduled for June 30 is needed to accommodate “ongoing discussions” between the companies.
The potential changes in the deal terms “would be a cynical lure to quick-buck artists, but otherwise a non-starter that any sentient shareholder should reject emphatically,” the investment firm says in a statement.
A change in the cutoff date for those eligible to vote — now at May 18 — would be “utterly indefensible and likely to provoke litigation.”
Indeed, the Mittleman says it would hold Carmike directors “personally accountable for such an unnecessary accommodation” to AMC and would “consider seeking immediate injunctive relief in Delaware to halt such an unjustified change in the record date.”
Mittleman that Carmike is worth at least $40 a share. AMC’s agreement this week to pay $1.2 billion for UK-based Odeon & UCI Cinemas underscores that valuation, the firm adds.
“[H]ow can $40 per share for Carmike (6.4x EBITDA cost to AMC) be unthinkable in one’s lifetime, but paying 9.0x EBITDA three days ago for a substantially less profitable enterprise is somehow a ‘bargain’ as AMC called it?” Mittleman asks.
“This highly unusual, perhaps unprecedented circumstance of one company (AMC) buying two major players in the same industry (CKEC and Odeon-UCI), of comparable size, economic characteristics, and prospects, at the same time, but for vastly disparate valuations, defies logical explanation.”
Ideally, the investors would “very much like to be shareholders in a combined AMC-Carmike, as we have conveyed both publicly and privately to AMC’s management, but only at a price that at least approaches some semblance of fair value.”
If AMC offered half of the purchase price in its stock, then Middleman says it would “embrace an offer of $37.50 per share.”
Up to now AMC chief Adam Aron said that he was prepared to walk away rather than pay more. The economics of the deal “get marginal very quickly for AMC above the $30 deal price,” he said this week. AMC is controlled by China’s Wanda Group.
Carmike shares are up 1.1% today to $30.93, suggesting that investors believe they’ll see more than AMC’s current offer.