AMC Entertainment Holdings Inc., the movie-theater operator owned by China’s richest man, resumed plans for a U.S. initial public offering, seeking $400 million.
The second-largest U.S. cinema chain, based in Leawood, Kansas, may use proceeds to fuel expansion and repay debt, according a regulatory filing yesterday. The offering size is a placeholder amount used to calculate fees and may change.
This would be at least the third IPO attempt by AMC Entertainment, which was bought by Wang Jianlin’s Dalian Wanda Group last year and owned, operated or held interests in 343 theaters as of June 30. The company may be looking to take advantage of strong U.S. ticket sales, according to Eric Wold, an analyst with B. Riley & Co. in San Francisco.
“We’re coming to the end of a record-breaking summer box-office period,” Wold said in an e-mail. “The timing looks smart.”
Theater owners are making acquisitions to gain leverage over film studios when negotiating revenue splits, Brett Harriss, a Rye, New York-based analyst with Gamco Investors Inc. (GBL)’s Gabelli & Co., said in a phone interview. Publicly traded stock might make it easier for AMC to do deals, he said.
“We’re seeing a consolidation pick-up,” Harriss said. “Being a public company could help.”
AMC Entertainment didn’t specify the number of shares being offered or at what price. The company canceled its most recent IPO effort in September 2012 when Dalian Wanda Group, China’s largest entertainment company, agreed to buy the exhibitor for $2.6 billion including debt. The deal made Wanda, with its holdings in China, the world’s biggest cinema owner. A previous AMC Entertainment offering was scrapped in 2008 after losses widened on declining revenue.
Summer movie ticket revenue will reach reach $4.7 billion after this weekend’s U.S. Labor Day holiday, which marks the end of the season, estimates researcher Hollywood.com. That’s about 10 percent more than last year and 7 percent higher than the previous record in 2011.
Although movie studios suffered some high-profile flops, such as Walt Disney Co. (DIS)’s “The Lone Ranger,” theater owners still saw that company’s “Iron Man 3” and five other films exceed $200 million in domestic grosses.
“‘The Lone Ranger’ still had $80 million in ticket sales,” Paul Dergarabedian, president of Hollywood.com’s Box Office division, said in an interview. “Even the films that didn’t meet expectations contributed to this record total.”
AMC Entertainment’s revenue increased 2.6 percent to $1.34 billion in the six months through June 30 from the year-earlier period, while profit from continuing operations more than doubled to $41.1 million, filings show. The company had about $2.1 billion of long-term debt at June 30.
While AMC Entertainment is a great brand, some of its theaters are too large, with 25 to 28 screens, said Matthew Harrigan, an analyst with Wunderlich Securities in Denver. The cost of running complexes that size makes it hard to match the profit margins of some competitors said.
“The sweet spot is 15 to 18,” Harrigan said. “I’ll be interested in seeing what progress they’ve made in reducing costs.”
The company is renovating some of its theaters to improve the guest experience, replacing finishes, improving the sound quality and adding plush, reclining seats operated electronically. Those locations have shown an 84 percent increase in attendance, according to the filing.
Wang, who is Wanda’s chairman, is China’s richest man with a net worth of $13.8 billion, according to the Bloomberg Billionaires Index. While his wealth is mostly derived from property in China, he is accelerating acquisitions overseas. AMC Entertainment didn’t say in the filing how much of the company Wanda will own after the sale.
Wanda acquired Sunseeker International Ltd., a U.K.-based maker of yachts, and a London building for $1.6 billion in June. Wang has said he plans to spend more than $1 billion to build a luxury residential complex along the banks of the Thames river.
AMC didn’t say in its filing which banks will underwrite the offering. The company has applied to list its shares on the New York Stock Exchange under the symbol AMC.