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Friday, March 13, 2015 11:10:53 AM

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Exclusive: Carmike Cinemas explores sale - sources (3/13/15)

By Liana B. Baker

(Reuters) - Carmike Cinemas Inc (CKEC.O), the fourth-largest U.S. movie theater chain, has hired investment bank JPMorgan Chase & Co (JPM.N) to help it explore strategic alternatives, including a potential sale, according to people familiar with the matter.

Carmike has approached some of its competitors in recent months in the United States and abroad to discuss a potential deal, the people said. There is no certainty that this process will result in a sale of the company, the people added.

Carmike shares jumped as much as 12.5 percent on the news and were trading up 9.8 percent at $34.06 in early morning trading in New York on Friday.

The sources asked not to be identified because the sale process is confidential.

Spokespeople for Carmike and JPMorgan did not immediately respond to requests for comment.

Columbus, Georgia-based Carmike has a market capitalization of around $830 million and competes with Cinemark Holdings Inc (CNK.N) and Regal Entertainment (RGC.N), as well as AMC Entertainment Inc, which was acquired by China's Wanda Group in 2012 for $2.6 billion.

Movie theaters face increasing competition from a range of digital entertainment options, such as Netflix Inc (NFLX.O) and Apple Inc (AAPL.O). Attendance has fallen in the United States and Canada over the past decade as a result.

Regal Entertainment announced last year that it had hired a bank to explore its options. It said in January it had shelved those plans. Sources said at the time this was due to the lack of strong buyer interest.

While theater attendance has been declining, Carmike has been pursuing growth by expanding into new areas, such as alcohol sales and dining in about 30 theaters.

Any merger of Carmike with a large competitor could be closely looked at by regulators, who have scrutinized the fairly consolidated cinema industry vigorously in recent years.

Last November, the Justice Department sued to block the merger of Screenvision and National CineMedia Inc (NCMI.O), the two largest suppliers of commercials in movie theaters. Carmike owns a stake in Screenvision, while the other large theater operators own stakes in National CineMedia.

Carmike had 278 theaters in 41 states as of the end of September, with more than 20 theaters in Georgia, Alabama, Florida, North Carolina and Pennsylvania, according to its website.

The company generated $689.9 million in operating revenue last year, up from $634.8 million a year ago. It had $352 million in net debt as of the end of December.

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