Columbus Ledger-Enquirer: Carmike Shareholders Approve Buyout by AMC
News story originally published at Ledger-Enquirer.com
By Tony Adams
More than eight months after the major deal was unveiled, Carmike Cinemas shareholders have finally approved the $1.2 billion sale of the company to AMC Entertainment Holdings.
The purchase was given the go-ahead by those holding the company’s stock at a special meeting Tuesday in Atlanta. Columbus-based Carmike said the “merger agreement” that had been amended over the summer was approved by 86 percent of the shares voted at the meeting.
The vote had been postponed three times before, prompting AMC to increase its initial $30-per-share offer to $33 per share or the option for shareholders to receive AMC stock. After the deal was sweetened in July, AMC Chief Executive Officer Adam Aron called it his firm’s “best and final offer.”
“We are pleased with the outcome of today’s vote,” David Passman, Carmike president and chief executive officer, said Tuesday in a statement. “In addition to providing Carmike stockholders with significant value and the opportunity to participate in the upside potential of a combined AMC-Carmike, this transaction creates an opportunity to deliver an even more compelling movie-going experience to more guests in many more locations across the country.”
The sale still requires federal regulatory approval, including from the U.S. Department of Justice, considering it would make AMC the largest movie-theater operator both in the United States and globally. Carmike said it expects the transaction to be wrapped up by early 2017, if not by the end of this year.
Under the agreement between Carmike and Leawood, Kan.-based AMC, those holding Carmike common stock will have the option of receiving $33.06 per share or 1.0819 shares of AMC common stock.
Carmike Cinemas operates 271 theaters with 2,923 screens in 41 states, including two first-run complexes and a discount movie house in Columbus.
The deal would make AMC Theatres the largest movie-theater operator in the world, with the Kansas chain ultimately operating more than 660 movie theaters and nearly 8,400 screens in 45 states and Washington, D.C. The No. 1 motion-picture exhibitor now is Knoxville, Tenn.-based Regal Cinemas, with nearly 600 theaters and roughly 7,300 screens. Carmike is the fourth-largest theater firm. Earlier this year, AMC also announced a $1.2 billion purchase of Odeon & UCI Cinemas Group in Europe.
AMC Entertainment Holdings is a majority-owned subsidiary of China-based conglomerate Dalian Wanda Group, which also operates cinemas in China and is considered that nation’s largest private property developer. That connection to China has created concern for some, with the Center for American Security on Tuesday saying that the merger between AMC and Carmike is another step in China’s effort to gain control of U.S. media sources—including theaters, movie studios and radio stations—and “determine what gets shown in U.S. theaters.”
“The AMC-Carmike deal is the most blatant example of China’s soft power play, yet the U.S. government has naively allowed Chinese propagandizing to continue unabated,” Richard Berman, executive director of the Center for American Security, said in a statement. “While American law prevents the vertical integration of movie production and distribution, Washington has failed to apply the same measures to the Communist-sponsored Dalian Wanda and its ability to influence the movie industry. The American public should be aware of how the Chinese government is expanding its sphere of influence overseas.”
Carmike’s corporate headquarters is located in an office building at the corner of First Avenue and 13th Street in downtown Columbus. AMC Theatres will remain headquartered in Kansas, the firms have said, with Aron continuing as CEO and Craig Ramsey, that firm’s chief financial officer, retaining his job. Richard Hare is the current CFO at Carmike.
In early March, as the acquisition was unveiled, Aron on a conference call implied that Carmike’s headquarters office would not be needed, as would some of its corporate operations.
“We expect to eliminate considerable redundant overhead costs related to back-office expenses, such as IT, accounting, legal and human resources by operating out of one headquarters based in Leawood, Kan., led by the AMC management team,” Aron said.
Carmike Cinemas dates to 1982 in its current form. That’s the year the late Carl Patrick purchased Martin Theatres from Fuqua Industries and renamed it using the names of his two sons, Carl Jr. and Mike. The latter would eventually become CEO of the company in 1989 and chairman of the board in 2002.
The firm’s board ousted Mike Patrick in January 2009, with the company continuing to struggle financially after exiting Chapter 11 bankruptcy protection seven years before that. The chain had racked up deep debt amid efforts to expand and modernize its theater footprint with digital screens and megaplexes featuring stadium seating.
Passman was Patrick’s successor and explained that the languishing stock price at the time was a prime reason for the board approving the CEO’s departure and paying him a $5 million-plus severance package.
“Our stockholders and our board and our employees, for that matter, are faced with a stock price that’s less than $3 a share,” Passman said at the time. “Some 24 months ago, it was at $26 a share. We want to see it back in those gangbuster days of higher stock prices.”
Since then, Passman has spent money on refurbishing the firm’s aging theaters, redesigning the concession stand and ticketing process, and growing the company’s theater and screen total through acquisitions and new complexes built to suit by property developers with long-term leases. Larger screens, digital audio and creative elements such as full-service dining have been part of the strategy, as has an agreement between it and IMAX in 2013 to open that premium format in some movie houses.