Carmike's Biggest Holder Opposes AMC Buyout Terms as Too Low

  • Says $40 a share cash would be fair value for cinema operator
  • Theater chain to press ahead with accord despite opposition

Carmike Cinemas Inc.’s largest stockholder opposes the $1.1 billion sale of the movie theater company to Dalian Wanda Group’s AMC Entertainment Holdings Inc. because the price is too low. Carmike responded that it’s pressing ahead.

“We intend to vote against, and to encourage other shareholders to vote against the merger agreement,” Mittleman Brothers LLC, which holds 7.1 percent of Carmike, said Tuesday in a regulatory filing. The price of $30 a share is “unacceptably low,” the company said, and suggested $40 is fair value.

The opposition throws a potential wrench into AMC’s plans to become the world’s largest cinema chain by acquiring Carmike. The companies announced an agreement on March 4 for AMC, the No. 2 U.S. exhibitor, to buy No. 4 Carmike. AMC is majority owned by Wanda, led by China’s richest man, Wang Jianlin.

Carmike responded in an e-mail saying its board had considered the level of interest from other parties and that it didn’t receive any offers that provided greater value than AMC Entertainment’s proposal.

“The board made this determination after thoughtful consideration of the options available to the company, including the level of interest from other third parties and the value potential of Carmike’s standalone plan,” the company said.

AMC, based in Leawood, Kansas, didn’t respond to a request for comment.

Analyst Eric Wold of B. Riley & Co. had said AMC was getting a bargain. He agreed with Mittleman that the $30 price is low yet downgraded Carmike to neutral, saying investors had to weigh the regulatory risks associated with the current agreement, against the potential for a counteroffer.

“I don’t see any reason why AMC would feel compelled to raise their offer just because of a shareholder letter indicating they thought it was too low,” Wold said in an e-mail. “If shareholders vote against the deal, then maybe AMC would come back with a higher offer.”

Shareholder Dialogue

Mark Zoradi, chief executive officer of Cinemark Holdings Inc., the No. 3 U.S. exhibitor based on revenue, called the AMC-Carmike deal a “good marriage” Tuesday at a Deutsche Bank investor conference in Palm Beach, Florida. That suggested his company won’t make a bid, according to Wold.

Chris Mittleman, managing partner of Mittleman, praised Carmike management in his letter, yet said his company would accept no less than $35 a share in AMC stock, or $40 in cash. AMC “has a very bright future, especially when combined with Carmike.”

Carmike, based in Columbus, Georgia, rose 0.5 percent to $29.92 at the close in New York. AMC fell 1 percent at $28.39.

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