From his Leawood office, AMC chief Adam Aron would have to drive 58 miles to inspect the nearest Carmike movie house he just agreed to buy. The next closest 120 miles, then 194 miles and so on.
And that’s the point. The $1.1 billion merger announced late Thursday between AMC Entertainment Holdings Inc. and Carmike Cinemas Inc. combines two rivals that aren’t too similar.
AMC’s 5,426 screens tend to be in larger cities and “heavily trafficked” by moviegoers who favor R-rated and action flicks, Aron said.
Carmike’s 2,954 screens mostly operate in smaller communities and rural markets, serving fewer viewers who look more often for faith-based or family films.
These differences mean AMC expects to win government approval of the merger by shedding only a few theaters to preserve competition, Aron said. And he expects no Carmike houses to close under AMC’s hand, though it would hope to sell those that regulators deem competitive with AMC.
“We’re putting together two very complementary circuits,” Aron said. “We’re enhancing competition nationally because there’s such little duplication.”
Carmike’s theaters are concentrated among Southern states, with half of its screens operating in Alabama, Florida, Georgia, North Carolina, Tennessee and Texas.
There are 10 screens at Carmike’s only Missouri theater, in Warrensburg, and 12 at its only Kansas theater, the Seth Childs 12 in Manhattan.
The merged chain would be larger than current No. 1 Regal Entertainment Group’s 7,361 screens, and AMC expects to be able to operate more efficiently than it and Carmike do separately.
Specifically, the companies together would shave $35 million off expenses. Some of those savings would come from “being a nimble, lean operator,” Aron said. Savings typically also include layoffs.
“I know that means more jobs in Kansas, our headquarters,” Aron said of the planned merger.
He would not say that it would mean fewer jobs in Columbus, Ga., where Carmike is based.
“Let’s not go there yet. They have a company to run for almost all of 2016,” he said.
Aron said a completed merger would see AMC invest in the Carmike chain to bring the same amenities that have spread to more and more AMC theaters — leather seats, bars in lobbies, food in theaters, etc.
“They’ve done it, but not necessarily as extensively as AMC has done it,” Aron said.
The merger makes such sense that Aron contacted Carmike executives his first week on the job at AMC. The two sides met over dinner on Aron’s third week.
Employees at AMC got a bit of a heads up on Aron’s first day at the Leawood headquarters. He sent a message out saying he had eight priorities.
“Growth through acquisition was one of the eight,” Aron said. “Here it is six weeks later and we have an announced transaction.”
AMC completed a small purchase last year, paying $172 million for the 346-screen Starplex Cinemas. It agreed to sell one theater each in Connecticut and New Jersey to complete the transaction.
AMC and Carmike expect to complete the deal by the end of this year, pending federal approval for the effect on competition in the industry.
Carmike’s website told customers that the merger would be “largely seemless” for them and that they could continue to earn Carmike reward points and buy and use Carmike gift cards.
Aron said it means AMC will spend much of this year focused on getting the merger done, but he also said more deals could lie beyond this one.
Bloomberg News contributed to this report.
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