Carmike Cinemas Inc fka CKEC

[Enterprising Investor]

AMC, Carmike CEOs See Merger Closing by Year’s End (

Deal would create nation’s largest movie-theater chain

By Erich Schwartzel

LAS VEGAS—The proposed merger of AMC Entertainment Holdings Inc. and Carmike Cinemas Inc., creating the nation’s largest movie-theater chain, is moving through a Justice Department antitrust review despite continued shareholder scrutiny, the companies’ chief executives said Monday.

In back-to-back interviews during the annual CinemaCon convention here, AMC CEO Adam Aron and Carmike CEO David Passman said their deal is on track to close by the end of this year. The $1.1 billion tie-up, announced last month, would create a chain with more than 8,000 screens, surpassing Regal Entertainment Group as the country’s biggest exhibitor.

But some prominent Carmike shareholders have complained that the $30-a-share price undervalues that company, the fourth-biggest theater chain in the U.S. The price was about a 20% premium to the closing share price of Carmike stock on the day of the announcement.

Carmike’s largest shareholder, Mittleman Brothers LLC, said in a letter to Carmike’s board that it would oppose the price as “unacceptably low.”

Mr. Passman defended the deal during his interview, saying that Carmike had shopped around to make sure AMC was offering a fair price. He wouldn’t name the other potential buyers the company approached, saying only that they were major exhibition companies and that none of them were willing to pay more than AMC.

“We believe that there’s only one buyer,” he said. Some of the shareholder pushback to the deal can be interpreted as run-of-the-mill complaints that crop up when major acquisitions are announced, he said.

An AMC-Carmike tie-up is about the biggest deal considered possible in domestic exhibition, since any other larger acquisitions among the nation’s biggest circuits would likely face intense antitrust scrutiny.

The companies might need to abandon some locations in the roughly dozen markets where they now compete, potentially raising anticompetition concerns at the Justice Department, Mr. Passman said.

Mr. Aron at AMC declined to comment on shareholder resistance to the deal but did say he still plans to bring AMC concepts such as dine-in theaters to Carmike locations once the deal is completed. Mr. Aron is new to the job, joining earlier this year after a stint running Starwood Hotels and Resorts Worldwide Inc.

Mr. Aron is entering an industry known for tapping “lifers” for top jobs and said he hopes to bring fresh eyes to the business.

Among the business strategies he wants to bring to the theater business: more focus on customer-loyalty programs, a new look at pricing strategy and a sales force focused on major clients.

AMC is rolling out a revamped version of its loyalty program, AMC Stubs, this summer. The program and other company efforts will help the exhibitor keep a closer eye on customer data, using it to promote coming features to individual moviegoers based on their histories.

Mr. Aron is also creating a pricing department at his company to assess ways to change traditional ticket pricing—including, he speculated, the idea of charging more or less for better or worse seats, as is typical for concerts, live theater and sports matches. Patrons craning their necks in the front row might pay less, he said.

Mr. Aron is hiring a nationwide sales force that will sell group tickets to companies, schools and Little League teams—another common strategy that movie theaters haven’t adopted, he said.

It is all part of a broader effort to find revenue from new or nontraditional sources rather than wringing the most money it can out of individual releases, Mr. Aron said.

On Monday AMC announced that it is working with Atom Tickets, a startup that aims to use a mobile app to help moviegoers organize groups to go to movies together.

Mr. Aron said he is “wholly disinterested” in negotiating the finer points of film-rental fees, which determine how much ticketing revenue is split between the studio and exhibitor. The traditional 50/50 split has given way to more lopsided ratios that favor studios as blockbuster grosses have grown.

“My focus is much more on growing the pie than arguing who gets what share,” Mr. Aron said.

http://www.wsj.com/articles/amc-carmike-ceos-see-merger-closing-by-years-end-1460489940