AMC Now The World's Largest Theater Chain

Barrington’s James C. Goss maintained an Outperform rating for AMC Entertainment Holdings Inc AMC, with a price target of $32, after the company agreed to acquire Carmike Cinemas, Inc. CKEC to become the world’s largest theater operator.

AMC’s acquisition values Carmike [Outperform, $30 price target] at $1.1 billion, offering $30 per share. Assuming there are no divestitures, the combined company would have more than 600 theatres and 8,380 screens. AMC plans to fund the purchase with incremental debt and cash on hand. The acquisition is expected to result in annual cost synergies of about $35 million, beginning in 2017.

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AMC seems to have become active in consolidation, going for Starplex first and now Carmike. “The acquisition takes AMC into a more diverse array of geographies, with Carmike, the theatre operator of ‘home-town America’ having little geographic overlap with AMC,” analyst James Goss said.

Goss commented that Carmike was a well-run company. Its current leadership includes CEO David Passmann and CFO Richard Hare, both of whom have executed on “a multi-year strategy to revitalize and grow its asset base.” He added that Carmike’s investments in maintenance of its plant and a significant acquisition strategy had generated robust financial results, with substantial growth in profitability over the past few years.