March 04--AMC Entertainment has entered an agreement to acquire Carmike Cinemas, which would create the largest chain of movie theaters in the country.
Under the terms of the agreement announced Thursday, Chinese-owned AMC would buy Carmike for $30 a share, in a deal valued at $1.1 billion, including assumption of Carmike's debt.
Shares of both publicly traded companies soared in after-hours trading on Wall Street.
Leawood, Kan.-based AMC is currently the second-largest U.S. movie theater operator, behind Regal Entertainment Group. Carmike is the fourth biggest.
Adding Carmike's 274 locations would expand AMC's reach to 653 theaters, making it the world's biggest chain. Knoxville, Tenn.-based Regal operates 572 cinemas.
The acquisition of Carmike, known for its strong presence in small towns, suburbs and rural areas throughout the country, will allow AMC to significantly increase its customer base. AMC is largely concentrated in urban areas, including Los Angeles.
Carmike runs a handful of theaters in Southern California, including locations in Temecula and Thousand Oaks.
In recent years, AMC has invested heavily in renovating and refurbishing its multiplexes with features such as upscale food offerings, reclining seats and new sound and digital equipment. AMC Chief Executive Adam Aron said the company plans to also make improvements to Carmike's theaters.
"The addition of Carmike increases our scale and our scope and allows us to take the successes we've had and extend them to these additional theaters," said Adam Aron, who was named CEO of AMC Entertainment in December.
"Wherever you go, this deal is complementary," Aron added. "We're strong in large cities, they're strong in smaller cities. We're strong in the Northeast, and they're strong in the Southeast."
AMC was acquired by Chinese real estate and media conglomerate Dalian Wanda Group in 2012 for $2.6 billion, creating the world's largest cinema company. Wanda owns the biggest chain in China, where the film business is booming.
The acquisition mirrors Wanda Chairman Wang Jianlin's ambition to increase his position in the global entertainment business. Wanda also recently bought Burbank production company Legendary Entertainment for $3.5 billion, and is considered a potential bidder for Paramount Pictures or another U.S. studio.
The deal is the latest example of consolidation in the U.S. theater business.
Carmike, headquartered in Columbus, Ga., recently bought Robert Redford's Sundance Cinemas for $36 million. The deal encompassed five theaters with 37 screens, including the Sundance Sunset in West Hollywood, as well as theaters in San Francisco, Houston, Dallas and Seattle.
In 2013, Regal, the nation's largest theater chain, acquired Hollywood Theaters, a Portland, Ore., chain that operates 43 theaters in 16 states, for $191 million in cash and about $47 million in assumed lease obligations.
"Fragmented industries have been consolidating for 100 years, and the movie theater business is a fragmented industry," Aron said.
The cinema industry is coming off a strong year at the box office, which hit $11 billion in the United States and Canada for the first time ever in 2015.
However, the exhibition industry has faced ongoing pressure because of long-term stagnation in domestic theater attendance. The average movie ticket price hit a record $8.43 in 2015, thanks to the increase in pricier options, including IMAX and 3-D screenings.
AMC this week reported fourth-quarter profit soared 40% to $41.6 million, thanks in part to the Disney-Lucasfilm blockbuster "Star Wars: The Force Awakens." Revenue jumped 10% to $783.9 million.
The acquisition announcement came after the close of Thursday trading on Wall Street. During the trading day, AMC's stock increased 55 cents, or 2%, to $25.70.
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