AMC says its Carmike deal is ‘now at considerable risk’

AMC Entertainment’s $1.1 billion purchase of rival Carmike Cinemas is “now at considerable risk,” AMC chief executive Adam Aron said Thursday.

The Leawood-based owner of AMC Theaters said it asked Carmike to adjourn its Thursday meeting at which shareholders were to vote on the buyout offer until July 15.

Carmike said in a statement that it convened the shareholders meeting and adjourned it until July 15 at AMC’s request. It said no vote on the merger had been taken.

Carmike’s chief executive gained the ability to adjourn the company’s shareholders meeting “from time to time” in a bylaws change enacted Wednesday, according to a filing with the Securities and Exchange Commission.

Investor groups have questioned AMC’s deal to buy Carmike as undervaluing the target since the transaction was announced in March.

AMC, the second-largest U.S. theater chain, is owned principally by China-based Dalian Wanda Group, though some of its shares trade publicly. Its purchase of No. 4 chain Carmike, based in Columbus, Ga., would make AMC larger than Regal Entertainment, currently No. 1.

One investor group that has challenged the AMC deal read Thursday’s adjournment of the Carmike vote as evidence that shareholders opposed the deal.

“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 Brothers LLC said in a Bloomberg News report.

Mittleman also said AMC could afford to pay $40 a share and still profit from the purchase, Bloomberg said.

AMC’s statement cited erroneous talk about Carmike’s situation.

“We believe that the loose price talk by some in the market about a potential transaction with Carmike has been unrealistically overstated,” Aron said in the statement.

AMC said it remains committed to its purchase of Carmike and the rationale for merging the two chains remains valid. But it said the value of the transaction weakens at prices higher than the $30 a share AMC agreed to pay for Carmike’s stock.

“AMC is a disciplined buyer. We note that the financial metrics surrounding the Carmike acquisition get marginal very quickly above the $30.00 deal price. Accordingly, we are fully prepared to see the Carmike transaction pass by the wayside,” Aron said in the statement.

Analyst James Goss with Barrington Research told clients in a note that Carmike shares have traded higher than the $30 deal price. But he is not expecting a significantly better offer from AMC.

“Adding in the risk that AMC appears willing to pull its bid, we feel that selling (Carmike shares) in the open market would remain a prudent option,” Goss said.

Shares of AMC gained 19 cents Thursday to $27.61. Carmike shares fell 37 cents and closed at $30.12.

This story was originally published June 30, 2016 at 11:51 AM with the headline "AMC says its Carmike deal is ‘now at considerable risk’."