B. Riley Looks At AMC-Carmike Deal From Both Sides

Shares of both AMC Entertainment Holdings Inc AMC and Carmike Cinemas, Inc. CKEC were down more than 1.1 percent on Monday trading, ahead of the latter’s shareholder vote regarding the proposed merger with the former. As noted in a B. Riley report issued Monday, the event can be interpreted as a positive for both companies.

From AMC’s perspective, the deal would be a positive if the company could acquire Carmike for “less than $37.50 in cash and less than $35.00 with up to 50 percent in stock,” the experts stated. It should be noted, however, that the firm’s analysis suggests AMC could see accretion well beyond the aforementioned levels; nonetheless, “more accretion is obviously preferable to less accretion,” the note concluded.

Related Link: Is AMC Even More Likely To Walk Away From Carmike Now?

Having said this, the analysts added that the $37 price target that accompanies their Buy rating on AMC is more of a floor than a cap, and, in fact, is based on assumptions that do not include the Carmike purchase.

From Carmike’s side, the analysts believe the most favorable outcome would include AMC walking away from the transaction. Even though this could hurt Carmike’s stock short term, the experts think that the company has plenty of potential to thrive as a standalone entity. Therefore, the firm recommended that, “should the transaction be called off… investors position themselves to take advantage of any material decline in CKEC shares.”

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.