AMC to buy Carmike Cinemas for $1.1bn

Mar 04, 2016, 10:36 AM EST

Chinese-owned AMC Entertainment will buy Carmike Cinemas for $1.1 billion, forming the largest theater chain in the U.S.

Reuters reports:

Chinese property and investment firm Dalian Wanda Group had acquired AMC Entertainment for $2.6 billion in 2012. The deal is the latest in a series of acquisitions of U.S. companies and assets by Chinese firms. Chinese companies have been aggressively splurging on foreign acquisitions to sidestep slowing domestic growth. Chinese firms spent more than $100 billion on overseas acquisitions in 2015, the most ever. In February ChemChina agreed to buy Swiss seeds and pesticides group Syngenta AG (SYNN.VX) for $43 billion. AMC will pay $30 per share in cash to buy all of Carmike's outstanding shares, which represents a premium of about 19.5 percent to Carmike's Thursday's close. The transaction will be funded through a combination of existing liquidity, including cash on hand, and incremental debt. The debt financing commitment is being provided by Citigroup Global Markets Inc. Dalian Wanda Group also agreed to acquire a majority stake in Legendary Entertainment earlier this year, valuing the U.S. movie studio company at between $3 billion and $4 billion. AMC, the second-largest movie theater chain in North America, currently has 387 locations and 5,426 screens while Carmike has 276 theaters with 2,954 screens in 41 states.

The New York Times notes:

AMC said the deal would increase the geographic spread of its theaters, while allowing it to trim expenses by consolidating administrative operations for the two companies. The company estimated the merger would yield about $35 million in annual cost savings. The deal is expected to close by the end of the year, pending approval from regulators and by Carmike shareholders. “This is a compelling transaction that brings together two great companies with complementary strengths to create substantial value for our guests and shareholders,” Adam Aron, AMC’s chief executive, said in a statement. Together with Regal, AMC owns Open Road Films, a movie distributor whose “Spotlight” was named best picture at the Academy Awards on Sunday. Debt financing for the deal will be provided by Citigroup, which also provided financial advice to AMC, while the law firm Husch Blackwell provided legal counsel. JPMorgan Chase and the law firm King & Spalding advised Carmike.

The Wall Street Journal writes:

China is home to the world’s second-largest box office, which rose 49% to $6.78 billion last year. The box-office growth is fueling a construction boom among Chinese theater companies. The market is expected to surpass the U.S. in a few years, driven in part by China’s desire to replicate American success in the entertainment industry. To learn how to do it, China has become a welcome source of capital for Hollywood studios. Recent deals include last month’s announcement that Chinese videogame company Perfect World Pictures invested $250 million with Comcast Corp.’s Universal Pictures to cover 25% of the production budgets of most movies made by the studio over the next five years. Last year, Lions Gate Entertainment Corp. struck a similar deal with Hunan TV & Broadcast Intermediary Co.