Bad news for Carmike’s management ahead of next Thursday’s shareholder vote on its agreement in March to sell to AMC Entertainment for $1.1 billion (including debt) — creating the world’s largest exhibition chain.
Investor advisory firms Institutional Shareholder Services and Glass Lewis urge clients to vote “no” on June 30, saying that the $30-a-share price is too low. They essentially agreed with arguments made by leading shareholders Driehaus Capital Management (with nearly 10% of the votes) and Mittleman Brothers (with 9.6%) who oppose the deal.
Carmike “has not provided a compelling reason for selling the company at this time for what appears to be a low valuation, particularly given that [Carmike] shareholders will be unable to participate in the potential upside of the combined entity,” ISS says.
It adds that other buyers likely would be interested in the No. 4 exhibition chain. And the fact that its stock traded above $30 for 46 days over the last year “seems to suggest that it would not be such a stretch for the company to achieve this valuation on a standalone basis.”
Glass Lewis also says that the merger “undervalues Carmike’s recent and expected financial performance.” It calls AMC’s offer “opportunistic, seeking to capitalize on the Company’s short-term stock price decline preceding the merger announcement.”
AMC Entertainment CEO Says Carmike Deal On Track, Likely With Divestitures
Carmike responded to the reports saying that the deal with AMC “is the culmination of a nearly two-year strategic review process during which no other offers were made.” The price would give shareholders a valuation that is “well above where Carmike’s stock has historically traded or where we expect Carmike’s stock to trade on a standalone basis within any time frame that would be acceptable to us, particularly in light of recent industry-wide downward trends.”
Still, the reports by ISS and Glass Lewis “will undoubtedly make, what we had already expected to be, an extremely close vote on [June 30] even closer,” B. Riley analyst Eric Wold says.
In late May, just 56% of Carmike’s shareholder votes favored its directors, he adds, which reflects “relatively low levels of shareholder satisfaction.”
He believes that AMC could offer more than $40 a share and still make money from a deal — which is why he’s still “confident AMC will ultimately prevail in its acquisition” of Carmike.
Carmike shares in mid-day trading are up 1.6% to $30.60, suggesting that investors believe they’ll end up with more than AMC’s current offer.
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.