U.S. sues to block National CineMedia deal for Screenvision

National CineMedia Inc. shares fell 22% after the U.S. sued to stop the company’s planned $375-million purchase of its closest competitor.

National CineMedia, the largest supplier of commercials in movie theaters, said in May it was merging with Screenvision Cinema Network, pending regulators’ approval. The merger would create a company providing advertising for almost 90% of U.S. movie screens.

The U.S. Justice Department contends in its antitrust complaint filed Monday in Manhattan federal court that CineMedia responded to an increase in Screenvision’s market share by buying its only real competitor.

“If allowed to proceed, the proposed transaction would eliminate competition that has yielded substantial benefits for exhibitors and advertisers,” the government said in its complaint.

The U.S. asked the court for an order blocking the deal and allowing companies that show films to rescind any contracts or contract extensions reached with National CineMedia and Screenvision since the proposed transaction was announced.

Shares of Centennial, Colo.-based National CineMedia fell 21.8%, to $12.44.

“I am obviously very disappointed that the DOJ did not see the benefits of the new combined company to our advertising clients and their agencies and our exhibitor partners,” Kurt Hall, National CineMedia’s chief executive, said in a statement. “We look forward to demonstrating those benefits.”

The company said the merger would increase the number of moviegoers reached by 60%, allowing it to compete with broadcast and cable TV networks and online and mobile video ads. The combined company would be able to target spots at particular demographic groups and reduce costs to advertisers, it said.

“The merger preserves all the desirable attributes of cinema advertising while allowing the combined company to compete more effectively on dimensions important to advertisers,” Travis Reid, CEO of New York-based Screenvision, said in the statement.

National CineMedia provides advertising to theaters including AMC Entertainment Inc., Cinemark Holdings Inc. and Regal Entertainment Group, which are part-owners of the company. The merger would create a business with a presence in 210 markets and more than 3,900 theaters, National CineMedia said when the plan was announced.