Nation's Two Biggest In-Theater Advertising Companies Announce Merger

2:29 PM PST 05/05/2014 by Alex Ben Block

UPDATED: National CineMedia is taking over Screenvision in a deal worth $375 million. The combined company will reach 34,000 screens in about 3,900 theaters nationwide

The two largest operators of in-theater advertising and alternative theater programming are merging in a $375 million deal that will put National CineMedia on 34,000 U.S. movie screens in 3,900 theaters -- reaching more than 1.1 billion ticket buyers annually in all 50 states.

NCM, a public company, is primarily controlled by three of the nation’s largest cinema circuits: AMC Entertainment Inc. (NYSE: AMC), Cinemark Holdings, Inc. (NYSE: CNK) and Regal Entertainment Group (NYSE: RGC). NCM currently reaches over 19,800 screens, representing 63 percent of the moviegoing audience. 

For many years Screenvision, based in New York City, has been one of the biggest in-theater advertising mediums reaching over 15,000 screen in more than 2,400 theaters and universities nationwide. Under the agreement announced Monday, NCM will pay the $375 million in cash and stock. NCM said in an announcement that it expects to achieve $30 million of annual operating cost synergies.

NCM will pay Screenvision’s owners $225 million in cash and $250 million of the company’s common stock (about 9.9 million shares at a price of $15.15 per share) subject to some price adjustments prior to the closing.

“It will position the combined new company to be much more competitive in the expanding video and overall advertising marketplace,” said NCM chairman/CEO Kurt Hall, “including the new online and mobile advertising platforms. With the investments we will be making to create one more efficient national network, I am confident that we will bring more advertising revenue to our theater circuit partners and a higher quality preshow to their patrons.

“As technology continues to empower consumers to watch programming how and when they want and view advertisements if they want,” added Hall, “with our broader network reach and improvements we are making to our audience targeting capabilities, I am confident that our theater network will become the one place where brands are comfortable their ads are being seen.”

The choices for advertisers continue to grow daily,” said Screenvision’s CEO Travis Reid, "and I am excited by the possibilities this business combination creates to enable advertisers to use this high-impact medium even more effectively to reach their business goals."

The acquisition already has been approved by the boards of both NCM and Screenvision. It still must clear some regulatory approval hurdles.

NCM was advised by J.P Morgan as financial advisor and Sherman & Howard LLC and Dechert LLP as legal counsel. Moorgate Partners and GreenbergTraurig, LLP advised NCM’s independent directors. Barclays is financial advisor to Screenvision and Latham & Watkins is its legal counsel.

Shares of NCM were up 2 pennies to $15.29 during the regular session Monday, but surged as much as 13 percent after the closing bell once its agreement to acquire its rival was made public.

The merger announcement also coincided with NCM's first-quarter financial results.

The company posted $70.2 million in revenue, down 15 percent from a year earlier mostly because it sold Fathom Events in December. Without the contribution a year ago of Fathom, which offers special events in movie theaters, revenue was off 5 percent. NCM lost $3.1 million in the quarter, up from $1 million a year earlier.

Paul Bond contributed to this report.

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