The companies’ boards have approved the transaction that values Carmike at about $1.1 billion including debt, and say that they expect the union to be complete by year’s end. Carmike had $454.7 in total debt at the end of 2015.
AMC’s two top executives — CEO Adam Aron and CFO Craig Ramsey — would hold the same jobs at the combined company. It would continue to be based at AMC’s home in Leawood, Kan.
Aron just became AMC’s chief in January. The chain is controlled by China’s Wanda Group, which paid $2.6 billion for it 2012. This past January, Wanda agreed to acquire a majority stake in Legendary Entertainment in a deal worth $3.5 billion.
“This is a compelling transaction that brings together two great companies with complementary strengths to create substantial value for our guests and shareholders,” Aron says. “Through this transaction we expect to unlock synergies, sufficient we believe to make this transaction accretive in 2017.”
He adds that the arrangement will help AMC’s initiatives to offer “plush power-recliners, enhanced food and beverage, premium sight and sound, greater guest engagement and targeted programming.”
Carmike shareholders would receive $30 per share in cash, a 19.5% premium over today’s closing price of $25.11 — giving it a market value of $604.4 million. Its shares rose 15.5% in post market trading. AMC is up 7.4%.
AMC, now the No. 2 chain behind Regal, says that it would maintain its quarterly dividend as well as “balance sheet flexibility.” It expects to save $35 million a year by eliminating duplication, especially at corporate headquarters.
AMC says it will finance the deal with cash on hand plus incremental debt, with financing commitments already “in place.” Citigroup Global Markets advised AMC and will raise the debt financing.
Carmike CEO David Passman says the companies have “highly complementary theatre footprints and a shared commitment to service and innovation.”
His company’s been under pressure to improve the stock price, which has lost about 20% of its value over the last 12 months — or at least return some cash to shareholders. It’s the only major chain that doesn’t pay a dividend.
Nearly a year ago it told shareholders that a report that it had hired JPMorgan Chase to look for a buyer was just a “rumor.” It says today that JP Morgan Securities was its “exclusive financial advisor” on the deal.
In October, activist investment firm Oasis Management bought 5% of Carmike. It said at the time that it planned to talk with management and other shareholders about “ways to maximize shareholder value, including matters concerning [Carmike’s] corporate governance, dividend policy, board composition, business, operations, management, strategy, and future plans.”
It added that it also might push for “strategic alternatives including exploring a sale.”
In December, Carmike announced plans to repurchase $50 million of its shares. Passman said that “reflects our confidence in Carmike’s strategy and our belief that Carmike’s stock represents an attractive investment opportunity.”