AMC strikes $1.2 billion European deal as U.S. merger stalls

AMC Theatres’ experience at home — leather recliners, in-theater meals, fuller menus — is heading overseas in a $1.2 billion deal that the Leawood-based chain announced Tuesday.

AMC Entertainment Holdings Inc. said it struck a deal to buy London-based Odeon & UCI Cinemas Group, Europe’s biggest theater chain, in a merger that would make AMC the largest theater operator in the world.

The deal for Odeon & UCI is expected to close in the fourth quarter. It still needs antitrust clearance by the European Commission and is subject to consultation with the European Works Council.

Many of the Odeon & UCI theaters will adopt the leather recliners and other changes that AMC has made in many of its U.S. theaters to alter the moviegoing experience and draw more revenue.

Stifel analyst Benjamin Mogil said in a client note that AMC’s plans to invest in the chain were relatively detailed, including $250 million to $350 million in investments over five years to refurbish the theaters.

This deal arrives as AMC’s pursuit of U.S. rival Carmike Cinemas has stalled. AMC announced a $1.1 billion acquisition of rival Carmike Cinemas earlier this year. The Carmike purchase was put on hold just as Carmike shareholders were to vote on the sale.

“The Odeon & UCI transaction does not impact AMC’s ability to complete the Carmike transaction, as AMC has the financing commitments and flexibility to do both transactions,” AMC said in an announcement of the newest deal.

AMC chief executive Adam Aron said buying Europe’s largest theater operator now represents a “once-in-a-generation opportunity.”

Great Britain’s vote to exit the European Union depressed the value of the British pound and made AMC’s offer less costly in terms of U.S. dollars. Aron added in the news release that Britain’s exit from the European Union does add risks to the European operation’s future.

The Odeon & UCI chain operates in the United Kingdom, Germany, Italy, Austria, Portugal and Spain. While the deal will require regulatory approvals, Aron said a European regulatory review would be perfunctory as AMC has just one theater in all of the U.K. and Europe combined.

“There is simply no antitrust risk here,” he said.

AMC won’t run into a shareholder issue as it has in bidding for Carmike. Odeon & UCI’s owner is Terra Firma, a private equity investor that has owned the European theater chain for 12 years. The chain has grown to 2,236 screens from 1,453 in 2004.

“We are confident that under AMC’s ownership, Odeon & UCI will continue to grow and thrive,” Guy Hands, Terra Firma’s chairman and chief investment officer, said in the announcement.

The European operation’s future still matters to Terra Firma. It is accepting AMC shares in addition to cash in the sale. AMC is paying about $487.5 million in cash and $162.5 million in AMC shares to Terra Firma. The $1.2 billion price includes Odean & UCI debt that AMC is taking on in the purchase.

AMC is largely owned by China-based Dalian Wanda Group though a portion of AMC’s shares trade publicly. Shares gained $2.03, or 7.3 percent, to $29.80.

This story was originally published July 12, 2016 at 8:08 AM with the headline "AMC strikes $1.2 billion European deal as U.S. merger stalls."