Shareholder: AMC’s buyout of Europe theater chain shows Carmike deal ‘fatally flawed’

AMC Entertainment Holding’s bid for the largest theater company in Europe for $1.2 billion shows its deal for Carmike Cinemas is vastly undervalued, one of Carmike’s vocal shareholders said Tuesday.

“There can no longer be any shadow of a doubt, Carmike’s board failed to realize anywhere close to a reasonable fair value for CKEC’s non-management shareholders in this fatally flawed transaction,” New York-based investment firm, Mittleman Brothers, said in a statement emailed to the Ledger-Enquirer.

The company said it owns 2.3 million Carmike shares, or just under 10 percent of the theater operator’s total shares.

Chris Mittleman, a managing partner in the New York company, has repeatedly urged Carmike shareholders to vote against the acquisition of the Columbus-based motion picture exhibitor based on AMC’s proposed cash price of $30 per common stock share. The overall deal, unveiled in early March, is valued at $1.1 billion, which includes paying shareholders, acquisition costs and assumption of Carmike debt.

Mittleman Brothers on Tuesday said its financial formula that it applied to AMC’s pursuit of both Carmike and London-based Odeon & UCI Cinemas Group shows projected earnings and cost synergies following the mergers of each works out to a price of $47.69 per share for Carmike, a 59 percent premium over the $30 per share now on the table. Mittleman has said several times that those owning Carmike stock should receive $40 per share.

“Odeon-UCI shareholders clearly benefited by a proper auction process, Carmike’s shareholders had no such benefit,” Mittleman Brothers said in its statement. “This AMC-Odeon-UCI deal should put to rest any questions about the validity of our call for a $40-plus fair value for CKEC shares, and our view remains that anything less is a travesty of fairness.”

Carmike Cinemas could not be reached for comment through the public relations firm it is using as the proposed acquisition unfolds. The company, headquartered in downtown Columbus, abruptly called off its special shareholder vote on June 30. It was rescheduled for this Friday. The company and its President and Chief Executive Officer David Passman have said the AMC deal is a solid one and the best offer the firm has received.

AMC President and CEO Adam Aron said in his own statement Tuesday that his firm remains committed to the purchase of Carmike Cinemas. But his words left an impression that his patience is wearing thin with the continued resistance by shareholders. He said AMC hopes the deal with the Columbus theater chain “can be saved.”

“As per our statement two weeks back, some Carmike shareholders have an unrealistic view as to Carmike’s value to AMC, and their resulting price expectations are simply beyond what AMC believes is prudent to pay,” Aron said. “We have said all along that AMC is a disciplined buyer, and that very much continues to be the case.”

Any price above $30 per share could be a deal killer, Aron implied, again declaring the proposed acquisition faces “considerable risk.” It appears AMC is prepared to walk away if necessary.

“Either way, so be it,” the CEO said. “AMC combined with Odeon & UCI, or AMC combined with Odeon & UCI along with Carmike, will be a terrific company.”

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. It $1.2 billion purchase of Odeon & UCI Cinemas Group, which is owned by private equity firm Terra Firma, includes debt and other costs and would make Leawood, Kan.-based AMC the largest movie-theater company on the planet. That’s a milestone AMC has mentioned previously in its dealings with Carmike.

Aron on Tuesday noted the Europe agreement comes amid both “uncertainties” and the “highly favorable” currency rates following Britain’s recent exit vote from the European Union, dubbed “Brexit” The British pound has plunged to a 30-year low against the U.S. dollar.

Odeon & UCI Cinemas Group operates 242 theaters and 2,236 screens in Europe, while Carmike has 276 theaters and 2,954 screens in 41 states. AMC has 385 locations and 5,380 screens, mostly in the United States.

Carmike has been headquartered in Columbus since 1982, when businessman Carl Patrick purchased the movie-theater chain Martin Theatres from Fuqua Industries and renamed it using the first names of his two sons, Carl and Mike. The company and its corporate headquarters staff, about 150 individuals, are located in a downtown office building. The company has about 8,000 employees overall, which includes theater management, ticket and refreshment sales staff.

Shares of Carmike rose 65 cents, or nearly 2.2 percent, closing at $30.30 apiece in trading Tuesday on the Nasdaq exchange. AMC’s shares leaped $2.03, or 7.3 percent, to $29.80 each on the New York Stock Exchange.

This story was originally published July 12, 2016 at 4:56 PM with the headline "Shareholder: AMC’s buyout of Europe theater chain shows Carmike deal ‘fatally flawed’."