AMC to purchase Carmike Cinemas in $1.1 billion deal

It had been in the speculation stage for nearly a year. But on Thursday, Carmike Cinemas and AMC Entertainment Holdings announced a $1.1 billion deal that will put Columbus-based Carmike in the hands of Leawood, Kan.-based AMC.

The two companies, whose boards of directors approved the purchase, said the proposed acquisition by AMC of Carmike should be completed by the end of this year, giving them plenty of time to receive the necessary federal regulatory approval.

Carmike's shareholders also must approve the deal, which involves AMC paying a nearly 20 percent premium over the Columbus firm's closing stock price Thursday. Its shares closed at $25.11 apiece Thursday, up a modest 47 cents, an indication that investors didn't see the acquisition news coming. In after-hours trading, Carmike shares jumped more than $4 per share. AMC also has agreed to assume all of Carmike's debt.

The deal would make AMC Theatres the largest movie-theater company in the world, the companies said, 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 currently the fourth-largest theater firm.

Carmike President and Chief Executive Officer David Passman called the acquisition a "transformative milestone" for his company that benefits its shareholders.

"By joining with AMC, we are bringing together two highly complementary theater footprints and a shared commitment to service and innovation, positioning the combined company to deliver an even more compelling movie-going experience in many more locations across the country," he said in a statement. "I am proud of the Carmike employees whose dedication and hard work have made this combination and its many benefits possible. We look forward to working together with the AMC team to complete the transaction and to ensure a seamless transition."

Adam Aron, AMC's president and CEO, also used the words compelling and complementary to describe the combination of the two entities.

"Through this transaction we expect to unlock synergies, sufficient we believe to make this transaction accretive in 2017," he said in a statement. "AMC also gets to extend the reach of our innovative, guest-experience strategies to further transform the movie-going experience for millions of new guests. We also look forward to welcoming so many talented Carmike employees to the AMC team."

The companies did not address any possible employee cuts or theater closings as part of those "synergies." They did estimate cost savings of about $35 million a year following the merger, including "reducing general and administrative expenses by combining back-of-the-house functions such as accounting, finance and technology."

Carmike is believed to have about 8,000 employees companywide, with the bulk of those part-time workers staffing theaters across its 45-state footprint.

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 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.

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.

There have been a steady stream of new theater openings over the past three years, along with strategic buyouts of smaller movie theater outfits. Major deals have included 16 theaters acquired from Rave Reviews Cinemas in 2012; nine properties from Muvico Entertainment in 2013; and five theaters from Sundance Cinemas in 2015.

On Monday, Carmike issued its fourth-quarter and full-year 2015 earnings report. It posted a profit, or net income, of $6.8 million (27 cents per diluted share) on total operating revenues of $220.6 million in the October-December quarter. That was up from a loss of $2.2 million (9 cents per share) on operating earnings of $185.3 million in the same period a year ago.

For all of 2015, the firm had a loss of $448,000 (2 cents per diluted share) on total operating revenues of $804.3 million. Still, that was much improved from an $8.9 million loss (38 cents per share) and operating revenues of $689.9 million in 2014.

This story was originally published March 3, 2016 at 7:55 PM with the headline "AMC to purchase Carmike Cinemas in $1.1 billion deal."