What a difference $3.06 makes. That’s all the share-price boost that was necessary to convince shareholders of Carmike Cinemas (NASDAQ: CKEC) to accept the buyout offer from AMC Entertainment (NYSE: AMC) in a cash-and-stock deal that values the movie operator at $1.2 billion. It makes AMC the biggest theater operator in the U.S. — and it was already the biggest in the world.
Back in March, AMC, which is owned by China’s Dalian Wanda Group, offered to buy Carmike for $30 a share. That was a 19% premium to where the stock was trading prior to the bid, but was nonetheless seen by Carmike’s biggest shareholders as undervaluing the company. Although a number of analysts suggested that at least $40 a share would be required — one even said $47 was appropriate — more thought that an additional $3.50 per share might be enough to sway investors.
You can’t say AMC doesn’t count its pennies. It came back with an enhanced offer of $33.06, which it deemed its “best and final offer.” AMC CEO and President Adam Aron warned Carmike not to dither, because as much as he wanted a deal, he could just as easily walk away.
“While we would like this transaction to go forward,” he said in a statement, “We are fully prepared to focus instead only on the improving fortunes of AMC and on our Odeon & UCI acquisition in Europe if a majority of Carmike shareholders do not find this revised offer attractive.”
AMC recently bought Odeon & UCI Cinemas Group for $1.2 billion, which made it the world’s biggest theater operator, but buying Carmike Cinemas makes it the biggest in the U.S. too.
Together, AMC and Carmine will have 8,380 screens across 600 locations in 45 states, putting it well ahead of current industry leader Regal Entertainment, which has about 7,300 screens, and No. 3 theater operator Cinemark Holdings with 4,500 screens.
Although Carmike has agreed to the merger and the deal is expected to close as soon as the end of this year, it still needs antitrust approval from the Justice Department, which will likely require some movie theaters be divested.
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Rich Duprey has no position in any stocks mentioned.
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