AMC Entertainment has won approval from the U.S. Department of Justice to buy Carmike Cinemas for $1.2 billion, clearing the way for an acquisition that will create the biggest U.S. movie theater chain.
But AMC will have to sell off some theaters and other holdings in order to satisfy regulators. In a proposed settlement filed Tuesday, AMC agreed to divest theaters in 15 geographical areas where its circuit overlaps with Carmike's.
AMC will get to choose which theaters it unloads during the 60 days after the deal closes, Chief Executive Adam Aron said in a conference call with investors and analysts. The company expects to sell 15 to 20 theaters, mostly from the Carmike chain, including two Starplex locations.
"Moviegoers across the United States have benefited from head-to-head competition between AMC and Carmike that has kept ticket prices in check and delivered a higher quality movie experience," Acting Assistant Atty. Gen. Renata Hesse said in a statement. "Today's settlement will ensure that movie theater competition is preserved in 15 local markets where AMC and Carmike currently compete."
Carmike and AMC are direct competitors in markets in Montgomery, Ala.; Destin and Miramar Beach, Fla.; and Cumming, Ga., the Justice Department said.
Leawood, Kan.-based AMC will pay $33.06 a share for Carmike of Columbus, Ga. By buying Carmike, AMC will expand its reach to easily more than 600 theaters, surpassing Regal's 565 locations for the No. 1 spot. AMC is currently No. 2, and Carmike is No. 4.
"We are confident that the growth potential of AMC is enhanced by joining forces with Carmike Cinemas," Aron said.
AMC shares rose 10 cents, or .3%, to $33.30 in midday trading on Wall Street. Carmike's stock was unchanged at $33.25.
AMC also will have to reduce its ownership stake and governance rights in National CineMedia, an in-theater advertising company. Carmike is a major backer of Screenvision Exhibition, National CineMedia's main competitor in the cinema advertising market. Together, the two networks serve 80% of U.S. movie screens.
Aron said AMC will reduce its National CineMedia stake to less than 5% from 17% during a 30-month period. AMC also will transfer 24 of its theaters, comprising 384 screens, to Screenvision's network.
Approval from the Justice Department represents the final regulatory hurdle for AMC, which is owned by Chinese real estate and entertainment giant Dalian Wanda Group. The company in November closed a deal to buy British theater owner Odeon & UCI Cinemas Group. The transaction is expected to close by the end of this year.
Wanda Group, run by billionaire Wang Jianlin, bought AMC for $2.6 billion in 2012. Earlier this year, the China giant acquired Legendary Entertainment for $3.5 billion and Dick Clark Productions for $1 billion.