AMC Theatres Makes $1.2B Bid For Carmike Cinemas: What’s In The Deal For Carmike Stockholders?

AMC Theatres may be one step closer to acquiring Carmike Cinemas!

According to Forbes, AMC Theatres offered a final bid of $1.2 billion to acquire Carmike Cinemas after the company’s shareholders rejected the initial offer of $1.1 billion. AMC CEO Adam Arron stated that “this latest agreement between AMC and Carmike is our best and final offer for Carmike.”

If this agreement becomes finalized, AMC Theatres will have acquired the fourth largest exhibitor in the United States of America. According to the report, the merger deal would consist of $1.2 billion cash and stock inclusive of debt. It would also create the largest chain in the country, with more than 600 theaters in the most recent acquisition by a Chinese-owned business of a U.S. company.

A finalized agreement between AMC Theatres and Carmike Cinemas will also open up a big door of opportunity for Carmike Cinemas’ stockholders. David Passman, the CEO of Carmike Cinemas, agrees that there is a substantial amount of value on the table for Carmike stockholders thanks to the proposed merger.

“The revised merger agreement provides significant additional value to Carmike stockholders and enables our stockholders to now participate in the potential upside of a combined AMC-Carmike. Our Board unanimously believes that this transaction is… in the best interest of all Carmike stockholders.”

Forbes reports that stockholders would be able to choose between 1.0819 shares of Class A common stock from AMC and $33.06 in cash per share, thanks to the $585 million in cash and $250 million in Class A common stock that will be paid to Carmike shareholders in addition to net debt based on the conditions of the agreement. The stock option was one of the new features added to the revised agreement. The initial agreement provided an all-cash offer of $30 per share.

This is apparently not the only film and entertainment company deal that Wang Jianlin, owner of AMC Theatres, has up his sleeve. Earlier this month, it was announced that AMC would acquire Odeon & UCI Cinemas Group for $1.2 billion in net debt. Dalian Wanda Group — Wang’s real estate and media conglomerate — purchased the following.

  • AMC Theatres for $2.6 billion in 2012
  • Hoyts Group, an Australian cinema chain, for $344 million in 2015
  • Legendary Entertainment for $3.5 billion in 2016

According to Forbes, AMC Theatres is reportedly a top bidder in the race to gain a minority stake of Viacom’s Paramount.

In a November, 2015, interview with the South China Morning Post, Wang Jianlin opened up about the need for the globalization of Chinese companies and the mixed track record for companies that decide to expand abroad. Jianlin stated that the biggest problem when it came to globalization was handling and retaining the acquired company’s original management.

“There must be original management when you acquire a company. How to mobilize the initiative of original management is the biggest problem. If you buy a company, but all the original management leave, you’ve probably already failed. All the companies Wanda have acquired have one thing in common, which is that Wanda didn’t assign anyone to the company, including AMC. By designing a reasonable and effective incentive system, you can make management work hard for you.”

Jianlin continued by using the acquisition of AMC Theatres as an example to support his point. He stated that, upon acquisition, a good incentive system was developed that allowed AMC “to make a loss in the first two years and make gains in the last three years.”

With this particular approach, AMC was able to generate a profit in the very first year that his company came on board — leading to a 20 to 30 percent increase in management income for three consecutive years.

“The most important thing in globalization is to keep the original team. When an American company acquires a Chinese company, they usually send in a team of Americans, and this is destined to fail.”

As long as they receive approval from Carmike shareholders as well as antitrust approval, the merger deal between AMC Theatres and Carmike Cinemas is expected to close by the end of 2016.

[Image via Jonathan Weiss/Shutterstock.com]