Carmike Cinemas Postpones Vote on AMC's Bid

Movie theater operator

Carmike Cinemas(NASDAQ: CKEC) says market volatility is the reason it wants to delay a shareholder vote on AMC Entertainment‘s (NYSE: AMC) bid to acquire it, but there’s also no question the merger already faced an uphill battle; two investors representing 20% of Carmike’s shares have said they oppose the deal, as have several institutional investor advisory firms.

AMC offered to buy Carmike in March for $1.1 billion, or some $30 per share, which was a 19% premium over the stock’s closing price prior to the news breaking. But shareholders Mittleman Brothers and Driehaus Capital Management, which together own about a fifth of Carmike’s stock, announced their opposition to the deal, saying the price was too low. They were later joined by Institutional Shareholder Services and proxy firm Glass, Lewis in saying the offer undervalued the theater operator. Analysts have suggested an additional $3.50 per share might sweeten the pot enough to get everyone on board.

AMC Entertainment is the second-largest movie theater operator with 5,426 screens; Carmike Cinemas is the fourth biggest with 2,954 screens. Together they would create the largest movie theater company in the U.S., surpassing current leader Regal Entertainment, which operates over 7,300 screens. Cinemark Cinemas is currently third with around 4,500 screens.

AMC is a majority-owned subsidiary of China’s Dalian Wanda Group, which purchased the theater chain in 2012 for $2.6 billion. China is set to surpass the U.S. as the world’s biggest market for theaters.

This merger, though, may face regulatory scrutiny, and if the Justice Department blocks the deal — which it has done on numerous occasions this year when large deals would have significantly reduced competition — AMC would be required to pay Carmike $50 million. If Carmike backs out, it would owe AMC $30 million. The delayed shareholder vote, though, may give time for AMC Entertainment to raise its bid to satisfy investors.

A secret billion-dollar stock opportunity

The world’s biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn’t miss a beat: There’s a small company that’s powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Rich Duprey has no position in any stocks mentioned.

Carmike Cinemas Postpones Vote on AMC's Bid