AMC to buy Odeon in biggest UK takeover since Brexit vote

LONDON (BLOOMBERG) - AMC Entertainment Holdings, the United States theater chain controlled by Asia's second-richest man, agreed to buy Odeon & UCI Cinemas Group for £921 million (S$1.61 billion) in cash and stock to expand in Europe.

AMC will pay £500 million for the equity, 75 per cent in cash and 25 per cent in stock, and assume net debt - at £407 million as of March 31 - the company said in a statement Tuesday.

The acquisition by AMC, majority-owned by Chinese billionaire Wang Jianlin's Dalian Wanda Group, widens Wanda's lead as the world's largest operator of movie screens.

Odeon, the first billion-dollar sale of a UK asset emerging since the Brexit vote, is Europe's largest cinema chain. A sale gives Guy Hands's Terra Firma Capital Partners Ltd. an exit from the business after a number of unsuccessful divestment attempts that date back to 2011.

AMC was preparing an offer for Odeon & UCI of as much as £900 million, people familiar with the matter said in May. Since then, the UK's referendum to leave the European Union has caused the pound to drop against the US dollar, making UK assets cheaper for overseas investors. Wanda, in the statement, attributed Brexit for the breakthrough in its three- year negotiations toward a deal.

"The deal is 10 per cent-plus less expensive than it was a few weeks ago," said Leo Kulp, an analyst at RBC Capital Markets.

AMC is still moving forward with plans to acquire No. 4 US theater chain Carmike Cinemas, though the company warned that it's prepared to walk away from its US$30-a-share purchase in the face of opposition from Carmike's largest stockholders.

"The economics of a transaction get marginal very quickly for AMC above the US$30 deal price," Chief Executive Officer Adam Aron said in a separate statement. "Therefore, the likelihood of an AMC/Carmike transaction continues to be at considerable risk."

The language was the "clearest yet" that AMC won't raise its bid, said Ben Mogil, an analyst with Stifel Nicolaus & Co., in a research note Tuesday.

Shares of AMC rose 2.1 per cent to US$28.35 at 10:01 a.m. in New York. Carmike fell less than 1 percent to US$29.47.

AMC is the No. 2 chain in the U.S. behind Regal Entertainment Group, and a purchase of either Carmike or Odeon & UCI would increase the theater chain's size by more than 50 per cent in terms of revenue. Odeon & UCI operates 2,236 screens from the U.K. to Spain and Germany; Carmike had 276 theaters with 2,954 screens in 41 states as of March 2016.

Wanda would be the first company in the industry to manage more than 10,000 screens.