Carmike Investors Should Oppose Buyout, Advisory Firms Say

  • AMC’s offer appears to undervalue company, Glass Lewis says
  • ISS says Carmike board hasn’t given compelling reason to sell

Carmike Cinemas Inc. investors should vote against the proposed $1.1 billion takeover of movie theater company by AMC Entertainment Holdings Inc., advisory firms Glass Lewis & Co. and Institutional Shareholder Services Inc. say.

Shareholders should reject the proposal as well as payouts to executives and authorization to adjourn a special meeting to give proponents more time to gather support, Glass Lewis said in the note distributed Friday.

While the board of Carmike, the fourth-largest U.S cinema chain, acted reasonably in response to AMC’s bid, they “accepted an offer that appears to undervalue the company and insufficiently compensates shareholders for both the past and reasonably-expected future financial performance,” Glass Lewis said.

Carmike’s board hasn’t provided a compelling reason for selling the company at what appears to be a low valuation, ISS said in note also published Friday. A deal would mean the company’s shareholders won’t be able to participate in the potential upside of the combined entity, it said.

Biggest Shareholders

Carmike’s two largest shareholders -- Mittleman Brothers LLC and Driehaus Capital Management LLC -- have both opposed the deal. Earlier Friday, Piper Jaffray Cos. analyst Alex Olvera wrote that AMC Entertainment, controlled by China’s second-richest man, could decide to increase its bid by as much as $3.50 a share. Opposition from proxy advisers could spur AMC, the second-biggest theater chain in the U.S., to bump up its offer, he said.

“Carmike continues to strongly believe that AMC’s $30 per share cash offer provides significant and compelling value and is in the best interest of all Carmike shareholders,” the company said in an e-mailed statement after the Glass Lewis note was published.

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