AMC Entertainment CEO Adam Aron made a quick stop in Barcelona at this week’s CineEurope exhibitors conference where he updated me on the possibility of the company doing a European IPO, the exhibition giant’s potential offloading of some non-strategic assets and developments further to the southeast in burgeoning Saudi Arabia. I also asked him whether AMC parent Wanda may be looking to sell.
In November last year, AMC said it may pursue a London IPO. Aron noted on an investor call, “It has not escaped our notice that even though European public markets value movie theaters at double-digit EBITDA multiples, we are not seeing such valuations for our European assets at these levels when they are buried within AMC.”
Today, he tells me the company has not made the final determination regarding an IPO in Europe where AMC acquired the UK’s Odeon cinemas group in 2016 and also owns Nordic Cinema. The timeline that was evoked for an IPO is somewhere between July of 2018 and June of 2019. “We might sell 25% of our European theaters, sharing ownership with the public in Europe, traded on a European exchange, but AMC would still clearly retain majority interest and majority control,” Aron tells me in Barcelona. “It would be a way of bringing money into the company to further make investments here, further deleverage the company while still keeping control of the business.”
AMC recently reduced its stake in movie theater ad firm Screenvision, selling off part of it for $45M to private equity firm Abry Partners while retaining a minority interest. Aron says, “We announced in August 2017 that we had identified in excess of $400M of assets we deem to be non-strategic to our business and this was one of them.”
The Screenvision sale was the fifth time since August that AMC has announced a sale, including its 50% ownership in Open Road Films. When AMC bought Carmike, Aron says there was a commitment to the U.S. Justice Department that it would sell about 14M more shares in National CineMedia by June of 2019, so it’s got that ahead.
AMC also did a sale and leaseback on a handful of theaters in the U.S. and Aron says “We may have an opportunity to do more of that, so we’ve got some irons in the fire.”
What about rumblings that AMC’s Chinese parent Dalian Wanda Group may be looking to divest while retaining its Chinese theaters? Says Aron, “Wanda is a terrific shareholder at AMC… They’ve allowed us to run the company from Kansas, they have allowed us to reinvest the vast majority of our profits into making our theaters nicer for moviegoers. They haven’t sold a single share in eight years… but you’re into speculation which is beyond both your and my paygrade. Wanda has said publicly they would like to sell some of their foreign assets, they’ve never said which ones. It’s status quo until it’s not.”
It’s certainly not status quo in Saudi. AMC opened its first screen there in April and had the first official screening of a movie with Disney/Marvel’s Black Panther on April 19, a historic event after the Kingdom’s more than three-decade ban on cinemas. The company took over a symphony hall to install that screen, and after the holy month of Ramadan soon finishes will go back into the space and turn it into a four-screen theater with about 1,000 seats. Aron estimates that could happen by September.
He says the theater has been “very full from the day we opened.” Of course during Ramadan the entire country slows down, but it’s been “a terrifically successful theater.”
As for the censors, “Every movie goes through an approval process and they’re making their suggested edits, but nothing I would describe as unusual for the region where there’s a long history of making edits to be sensitive of the local customs.”
Overall, “I think you have to look at this so far as a triumphant success with a high priority for the government of Saudi Arabia to reopen cinemas. We were selling out right away, so the government was happy, moviegoers were happy, studios were happy, AMC was happy. It’s just the beginning of what’s to come.”
AMC has a partnership with the Public Investment Fund of Saudi Arabia’s Entertainment Development & Investment Company to open and operate cinemas in Saudi with plans to open 50-100 over 3-5 years. Is that overly ambitious? “There are malls all over Saudi Arabia where theaters could easily be put in place… What we’ve said is 50-100 over 3-5 years, that’s our goal. We have more in the works already. We’ve got no anxiety about the timeline I’ve just described,” Aron says.
There will eventually be an average 10 screens per theater, “but in the first ones, the spaces weren’t built to accommodate that.”
He further notes that the opening of the market is “a great opportunity for our industry but it’s a great responsibility on the shoulders of those of us who are operating there to do it right and do it well.”
He elaborates, “This is an advance for their country, which if done well will just be an advance, but if studios or exhibitors err along the way, then there could be some painful black eyes that offset some of the advancement.”