The company plans to use the money from the share sale to Mudrick Capital "primarily for the pursuit of value creating acquisitions of theater assets and leases, as well as investments to enhance the consumer appeal of its theaters."
Exhibition giant AMC Theatres has struck a deal to raise more than $230 million for possible theater acquisitions and investments to make its cinema circuit more appealing to consumers as it looks to strengthen its business outlook post-pandemic.
“On June 1, 2021, AMC Entertainment Holdings issued to Mudrick Capital Management 8.5 million shares of the company’s Class A common stock for $230.5 million,” the exhibition firm, led by CEO Adam Aron, said in a regulatory filing on Tuesday. “The company intends to use the proceeds from the share sale primarily for the pursuit of value creating acquisitions of theater assets and leases, as well as investments to enhance the consumer appeal of its theaters.”
“In addition,” the filing read, “with these funds, the company intends to continue exploring deleveraging opportunities.”
In a press release, Aron said: “Given our scale, experience and commitment to innovation and excellence, AMC is being presented with highly attractive theater acquisition opportunities. We are in discussions, for example, with multiple landlords of superb theaters formerly operated by Arclight Cinemas and Pacific Theatres. With this agreement with Mudrick Capital, we have raised funds that will allow us to be aggressive in going after the most valuable theatre assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities.”
AMC Theatres had already raised $100 million from investment firm Mudrick in a debt offering in December.
In late April, AMC Theatres backed away from a plan to authorize 500 million new shares to raise money. It had sought shareholder approval for the plan, which would have nearly doubled the total number of AMC shares on the market. The firm said that “upon review and careful consideration with further discussions with management and its advisors,” it had decided to withdraw the proposal. Instead, the company announced an “at-the-market” offering that allows it to sell up to 43 million shares.
AMC Theatres’ stock rose in pre-market trading on Tuesday to more than $28 after closing 2020 at $2.12. The new stock issued was sold for about $27.12 per share, above last week’s closing price of $26.12. The stock, along with shares of other cinema groups, has risen this year amid increased confidence in the reopening of the sector and the broader economy, helped by coronavirus vaccinations, following a big pandemic hit to the exhibition industry last year.
Wanda Group recently sold off essentially its entire stake in AMC Theatres, exiting the U.S. theatrical exhibition business. Wanda had a controlling stake in the exhibition powerhouse since 2012, but January’s Reddit-fueled stock rally saw the company trade in its super-voting Class B stock for Class A common stock, giving up control but giving it the option to cash out. In late May, AMC disclosed that Wanda had sold all but 10,000 shares, netting $426.7 million. It previously sold three tranches for $220 million.
Tuesday’s stock transaction “underscores the real value of having some authorized share capital available for us to opportunistically capitalize on shareholder value creation possibilities as and when they arise,” said Aron. “With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again.”