They say there's a winner and a loser in any deal. In the case of AMC Entertainment's $1.1 billion takeover of Carmike Cinemas, the winner would be
AMC Chinese billionaire Wang Jianlin.
AMC, the U.S. movie theater chain controlled by Wang's Dalian Wanda Group, opportunistically swooped in to buy the smaller rival after Carmike's stock tumbled during the past year. The transaction, at $30 a share, values Carmike at about 9 times its trailing 12-month Ebitda. The company had traded closer to 10 times Ebitda a year ago, according to data compiled by Bloomberg. (Or, using Carmike's own calculation of adjusted Ebitda, the takeover multiple is about 8, versus almost 9 a year ago.)
It's not a huge difference, but the price may be slightly disappointing for shareholders who bought Carmike shares when they were trading above $30 apiece last March -- the same month Carmike was said to have hired JPMorgan Chase to help it find a buyer. By waiting until now to forge a deal, AMC and Wang were able to get it far cheaper than what would have been required back then.
The offer happens to be for the same price that analysts were estimating Carmike shares would fetch on a stand-alone basis in a year, which may cause some investors to wonder whether the company's bankers should have pushed for a tad more. That said, it is a 41 percent premium to Carmike's 20-day average, which is no small premium.
Because it's an all-cash deal, though, Carmike shareholders also don't get to benefit from any potential upside for the combined company. AMC estimates $35 million of annual cost synergies, and gets to add more theaters in smaller cities and towns to its own urban locations (as long as the merger doesn't draw the ire of antitrust regulators, which it may).
Together, the two cinema operators will vault past competitor Regal Entertainment to become the largest U.S. movie-theater chain. And at the top will sit Wang, who bought AMC from its private equity owners in 2012 and then took it public the following year. His conglomerate of real estate and entertainment businesses owns about 78 percent of AMC's common stock and has 91 percent of the voting power.
The possibility of a competing bid from, say, Regal remains. On Friday morning, Carmike was trading above $29 a share, which is a very tight spread for a deal that just got announced and could have regulatory hurdles. This may signal speculation among investors that Carmike has a chance of getting more money in a deal. So don't roll the credits just yet.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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