AMC Entertainment Holdings Inc’s US$1.1 billion deal to acquire Carmike Cinemas Inc is on the verge of collapse, a setback for Chinese billionaire Wang Jianlin’s (王健林) plans to build the world’s largest movie theater chain.
AMC, controlled by Wang, China’s second-richest man, said it was prepared to walk away from its proposed US$30 per share acquisition after facing opposition from Carmike’s largest stockholders, who say the price is too low.
“This transaction is now at considerable risk,” the company said in a statement on Thursday after Carmike announced that it postponed a shareholder meeting to vote on the deal until July 15, at AMC’s request.
“We believe that the loose price talk by some in the market about a potential transaction with Carmike has been unrealistically overstated,” it said.
AMC, the No. 2 chain in the US behind Regal Entertainment Group, is trying to acquire No. 4 Carmike in a deal that would make the company the world’s largest movie exhibitor.
Carmike’s two largest shareholders — Mittleman Brothers LLC and Driehaus Capital Management LLC — have opposed the deal and added to their stakes. Together they own about 20 percent, according to data compiled by Bloomberg.
On Thursday, Mittleman Brothers, which has a 9.6 percent in Carmike, expressed its disappointment with the decision to delay the meeting and said it implied overwhelming opposition to the buyout. The investor also criticized Carmike for amending its bylaws to allow for possibly more delays.
“AMC and Carmike’s board are choosing to draw out the process rather than allowing the vote to occur on schedule and properly heeding the will of the company’s shareholders to terminate this fatally flawed transaction,” Mittleman said in a statement.
Shareholders have had 88 days to consider the offer, while the Carmike board took 57 days to negotiate and approve the offer, Mittleman said.
Carmike said in an e-mailed statement that “under the terms of the merger agreement, AMC had the right to require the adjournment and related bylaw change.”
Mittleman reiterated its view that AMC could pay up to US$40 per share and still profit from the acquisition. It urged other shareholders to oppose the deal when it comes to a vote on July 15.
The investors were joined in their opposition by two shareholder advisory firms, Glass Lewis & Co and Institutional Shareholder Services Inc, which came out against the transaction on June 17, saying the offer undervalued Carmike.
The same day, analyst Alex Olvera of Piper Jaffray & Co wrote that AMC Entertainment could decide to increase its bid by as much as US$3.50 per share.
“We note that the financial metrics surrounding the Carmike acquisition get marginal very quickly above the US$30 deal price,” AMC said in its statement. “Accordingly, we are fully prepared to see the Carmike transaction pass by the wayside.”
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