AMC Theatres buying Europe's Odeon & UCI in $663M deal

AP News
|
Posted: Jul 12, 2016 7:40 PM
AMC Theatres buying Europe's Odeon & UCI in $663M deal

LOS ANGELES (AP) — The owner of the AMC Theatre chain is buying European movie theater operator Odeon & UCI Cinemas Group from private equity firm Terra Firma in a deal that would make it the largest movie theater operator in the world.

AMC will pay 500 million pounds ($663 million) in cash and stock. It will also assume 407 million pounds ($539.4 million) in debt.

AMC CEO Adam Aron said in a call with investors on Tuesday that the deal was spurred on by a British pound at a three-decade low versus the dollar following Britain's vote to leave the European Union, the so-called "Brexit."

"We're making this acquisition opportunistically," he said.

London-based Odeon & UCI has 242 theaters in Europe. The deal will give AMC a total of 627 theaters in eight countries.

Odeon & UCI will become an AMC subsidiary and continue operating under its current brand names.

AMC, which was bought by Chinese conglomerate Dalian Wanda Group in 2012, is still in the process of trying to buy American movie theater operator Carmike Cinemas Inc. of Columbus, Georgia. That transaction, which was announced in March, is valued at $1.1 billion including debt.

Wanda also bought Hollywood studio Legendary Entertainment for $3.5 billion in January, creating the one-two punch of being a movie maker and distributor at the same time. That popcorn combo helped Legendary's "Warcraft" get distributed in a record 68 percent of Chinese theaters in June despite its lukewarm reception in other countries. The film has grossed $430 million worldwide so far.

On Tuesday, AMC said that the Odeon & UCI transaction doesn't impact its ability to complete the Carmike deal. The company said it has the financing commitments and flexibility to do both.

But AMC President and CEO Adam Aron said in a written statement that there continues to be "considerable risk" to the Carmike deal, as some of Carmike's shareholders have an "unrealistic view" of the company's value to AMC. Aron said that AMC will continue to work with Carmike this week to see if the transaction can be saved.

The deal for Odeon & UCI is expected to close in the fourth quarter. It still needs antitrust clearance by the European Commission and is subject to consultation with the European Works Council.

Aron said the transaction doesn't require a shareholder vote as Odeon & UCI are privately owned by a single shareholder, and aims for the deal to be closed by the end of the year. He said a European regulatory review would be perfunctory as AMC has just one theater in all of the U.K. and Europe combined. "There is simply no antitrust risk here," he said.

Aaron told investors Tuesday that the company has already identified 50 Odeon and UCI theaters "ripe for an AMC-style overhaul" that would include such improvements as better food offerings and reclining seats.

Stifel analyst Benjamin Mogil said in a client note that AMC's plans to invest in the chain were relatively detailed, including $250 million to $350 million in investments over five years to refurbish the theaters. That plus IMAX expansion should spur growth, since Odeon & UCI has been owned by a private equity firm for 14 years and has been "relatively capital starved," he said.

AMC will remain headquartered in Leawood, Kansas.

Shares of AMC Entertainment Holdings Inc. rose $2.03, or 7.3 percent, to $29.80 Tuesday. Carmike gained 65 cents, or 2.2 percent, to $30.39.

___

Anderson reported from New York. Business Writer Michelle Chapman in New York also contributed to this report.

___

This story has been corrected to show that the Odeon & UCI deal value excluding debt totals 500 million pounds ($663 million) in cash and stock.