The film critic Roger Ebert once said, "No good movie is too long, and no bad movie is short enough." The same is true of merger negotiations -- when a transaction makes sense, it's worth going the extra mile, while other deals don't merit the effort. In the case of AMC Entertainment's takeover of Carmike Cinemas, it's a deal worth fighting for.
AMC Entertainment's initial offer of $30 a share left some Carmike shareholders feeling short-changed. So some pushed back, calling for a higher price or an end to the deal altogether. That forced the movie-theater chains back to the negotiating table, and they came up with a better agreement in the end, even if it took months to get there.
AMC and Carmike announced Monday morning the revised terms for their merger: $33.06 per share in cash or 1.0819 AMC shares. It's a 10 percent bump to the original offer and gives Carmike shareholders the chance to own AMC, which is controlled by Chinese billionaire Wang Jianlin's Dalian Wanda Group. In announcing this new agreement, AMC made plain that there will be no more sequels to deal talks -- the show's now over, roll the credits:
For absolute clarity, let there be zero room for doubt or miscalculation. This latest agreement between AMC and Carmike is our best and final offer.
This is a much more balanced transaction now and one that will likely appeal to a lot of shareholders, even though it doesn't bridge the gap with the $40-plus that two dissenting shareholders demanded. On July 15, Mittleman Brothers made clear that a $33 offer would still be "grossly inadequate" and a "cynical lure to quick-buck artists." Judging by Carmike's early trading Monday -- and perhaps these are the quick-buck artists Mittleman was referring to -- others seem to think the deal is on. Carmike's stock traded at an almost 7 percent discount to the new offer but remained above $30 a share on Monday morning, implying some investors still think the transaction will secure enough votes, though it's not a sure thing.
It's tough to grumble with AMC's bid now. It's higher than where analysts saw Carmike shares trading in a year's time. It's a fair takeover premium. And Carmike's board has agreed to it. Also, Carmike investors wanted some AMC shares and now they can get them.
AMC will be a stronger, more attractive company after its Odeon & UCI purchase and if it can get Carmike. With Carmike, it would add theaters in areas where there aren't AMCs, so it's a nice geographic expansion within the U.S. And then with Odeon & UCI, the European chain that AMC announced it was buying two weeks ago, it gets to expand in markets abroad such as the U.K., Spain and Germany.
In both cases, AMC is acquiring locations that will need upgrades, such as more spacious reclining seats and better food choices, a costly process that the company thinks will pay off by luring more people back to movie theaters and provide growth in an industry many had written off as past its prime. If you've been to one of these upgraded theaters lately, you can see why it may be worth the higher ticket price.
If this strategy works, it could be very good for AMC shareholders -- which will include Carmike shareholders if they agree to this deal. If they don't, Carmike's stock may drop and AMC will be just fine.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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