AMC Theatres to Acquire Europe's Odeon & UCI Cinemas in $1.2B Deal

Movie Theater Audience - H 2012
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Movie Theater Audience - H 2012

With the pound hit by the Brexit vote, the Wanda-owned giant will buy the London-based company, the largest European exhibition group, from private equity firm Terra Firma.

Cinema giant AMC Entertainment, which does business under the name AMC Theatres, said Tuesday that it has entered into a definitive agreement to acquire the largest exhibitor in Europe, London-based Odeon & UCI Cinemas Group, from private equity firm Terra Firma in a transaction valued at approximately £921 million, or $1.2 billion.

The deal will come 75 percent in cash and 25 percent in stock consideration, subject to lock-ups, and also includes the assumption of £407 million, or $535 million, of net debt as of March 31. 

Odeon is one of the oldest known cinema operators in the U.K., which a name that dates back to 1930. Having changed ownership several times and having merged in 2004 with UCI, which operates across Austria, Germany, Italy and Portugal, it is now the largest theater chain in the U.K. by market share and, with 242 venues and 2,236 screens, currently the top exhibitor in Europe. It operates, among others, the Odeon Leicester Square theater, housing the largest single screen in the U.K. and home to many world and European premieres. Since 2012, Odeon has also operated the BFI IMAX at London Waterloo, the largest screen in the U.K. and the most profitable IMAX venue internationally.

“This is a once-in-a-generation opportunity to acquire Europe’s leading cinema chain and create the world’s biggest and best theater operator,” said AMC Theatres CEO and president Adam Aron. “With this opportunistic transaction, AMC will be extending the reach of our proven guest experience strategies to transform the moviegoing experience for millions of moviegoers in Europe. Odeon & UCI is a great business with iconic brands, strong market presence and passionate teams, and their impressive recent transformation is just the beginning."

He added: "While we acknowledge that there are some uncertainties related to Brexit, we are encouraged that current currency rates are highly favorable to AMC with the pound falling to a three decade low versus the dollar. In total, we believe this transaction will generate long-term value for our guests, our studio partners and our shareholders.”

AMC is owned by China's Dalian Wanda Group. It recently said that it may walk away from its $1.1 billion deal to acquire Carmike Cinemas after a shareholder vote on the proposed deal was pushed back to July 15.

Aron said Tuesday: "AMC remains committed to moving forward with our plan to acquire Carmike Cinemas. However, as per our statement two weeks back, some Carmike shareholders have an unrealistic view as to Carmike’s value to AMC, and their resulting price expectations are simply beyond what AMC believes is prudent to pay. We have said all along that AMC is a disciplined buyer, and that very much continues to be the case."

He added: “We intend to continue to work this week with Carmike to see if the AMC/Carmike transaction can be saved, but we again note that the economics of a transaction get marginal very quickly for AMC above the $30 deal price. Therefore, the likelihood of an AMC/Carmike transaction continues to be at considerable risk."

Concluded the CEO: "Either way, so be it. AMC combined with Odeon & UCI, or AMC combined with Odeon & UCI along with Carmike, will be a terrific company.”

Terra Firma founder Guy Hands, also known for a failed investment in former music giant EMI that was in 2011 taken over by Citigroup, the main lender, combined Odeon and UCI. Terra Firma acquired both circuits in 2004 for €650 million and €350 million, respectively, and has repeatedly looked at a sale or IPO. Most recently, it emerged last year that a sale could be in the works for a reported target price of around $1.55 billion.