AMC Theatres agreed this morning to increase its offer for Carmike Cinemas by about 10% to $1.2 billion (including debt), leading the No. 4 exhibition chain to postpone for the third time a shareholder vote on a transaction. It had been scheduled to take place this morning.
The new cash and stock offer comes in at $33.06 a share, up from $30.00. Carmike stock is up 2.8% to $32.00 in pre-market trading.
Some of Carmike’s largest shareholders opposed AMC’s original all-cash offer. It was too low and would leave them unable to benefit from a deal that would turn the USA’s No. 2 chain into the world’s largest, they said. The new terms consist of $585 million in cash and $250 million in AMC’s Class A common stock.
Carmike CEO David Passman says the changes enable stockholders to “participate in the potential upside of a combined AMC-Carmike while continuing to receive significant, premium value for their investment in Carmike.”
Before today’s announcement, AMC chief Adam Aron warned that he might walk away rather than pay more. The economics of the deal “get marginal very quickly for AMC above the $30 deal price,” he said. He added this month that “the likelihood of an AMC/Carmike transaction continues to be at considerable risk” if shareholders hold out for more. AMC is controlled by China’s Wanda Group.
Today he says that that there should be “zero room for doubt or miscalculation. This latest agreement between AMC and Carmike is our best and final offer for Carmike. While we would like this transaction to go forward, we are fully prepared to focus instead only on the improving fortunes of AMC and on our [recently announced] Odeon & UCI acquisition in Europe, if a majority of Carmike shareholders do not find this revised offer attractive.”
AMC expects the Carmike deal to offer $35 million a year in savings and synergies. The chains also have “limited geographic overlap.” AMC currently has 5,380 U.S. screens while Carmike has 2,954. If combined, AMC’s 8,334 would top current industry leader Regal which has 7,329.
With UK-based Odeon & UCI, AMC would have 10,570 screens worldwide.
AMC says that it has “has fully committed financing in place” to buy Carmike, including existing cash, incremental debt, and equity issuance. Citigroup Global Markets has agreed to provide the additional debt.
The companies expect the deal to close by year end — assuming Carmike shareholders, as well as antitrust officials, now approve.