AMC Theatres to Acquire Odeon & UCI Cinemas

AMC Theatres is set to become the world’s biggest exhibitor following its announcement of the acquisition of Europe’s largest circuit, Odeon & UCI, from private equity firm Terra Firma.

Under its 12 years of ownership by Terra Firma, Odeon & UCI dedicated over £600 million in a growth strategy that saw its screen count increase from 1,453 in 2004 to today’s 2,253 screens across 242 theaters. Odeon & UCI is currently the leading exhibition circuit in Europe and was ranked as the 9th biggest circuit in the world by Boxoffice Magazine earlier this year. It is the market leader in the UK & Ireland, Italy, Spain and occupies the #2 position in Austria and Portugal while being #4 exhibitor in Germany. The company reports 90 million tickets sold annually and approximately $1.156 billion in revenue for the last 12 months ending March 31, 2016.

The blockbuster deal is valued at approximately £921 million, a figure significantly more amenable for the purchaser due to the steep decline of the Pound that following the results of the UK’s “Brexit” referendum earlier this summer. In fact, the GBP/USD exchange rate set for the deal, should it close by December 31 of this year, will be at 1.30; a substantial discount considering the exchange rate of 1.47 recorded at the start of June. In context, the GBP/USD exchange rate was at 1.71 during this time in 2014, according to Bloomberg Markets. An AMC press release details the deal will be “comprised of £500 million for the equity, 75% in cash and 25% in stock consideration, subject to lock-ups, and the assumption of £407 million of net debt as of March 31, 2016 to be simultaneously refinanced at closing.”

The transaction is valued at approximately $1.199 billion in USD under the terms of the deal and is conditional upon antitrust clearance by the European Commission.

AMC CEO and President Adam Aron acknowledged the influence of a more amenable exchange rate for the deal in an official statement. “This is a once-in-a-generation opportunity to acquire Europe’s leading cinema chain and create the world’s biggest and best theatre operator,” he said. “With this opportunistic transaction, AMC will be extending the reach of our proven guest experience strategies to transform the movie-going 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. By introducing AMC’s operational expertise, scale and innovative guest initiatives across Odeon & UCI’s prime theatre locations and digital channels, we expect to drive attendance in these international markets and leverage the growing international demand for movie going. 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 outlined three key benefits of the transaction through a press release:

  • Increases in attendance and revenue are expected at Odeon & UCI theatres after the introduction of AMC’s proven and successful guest experience strategies. Emphasis will be placed on accelerating AMC’s proven growth initiatives, featuring recliner seating, enhanced food and beverage and premium large format auditoriums, as well as further developing Odeon & UCI’s innovative marketing, customer relationship management and pricing expertise.
  • The acquisition is expected to further diversify AMC’s footprint by adding theatres with complementary global geographic and guest demographic profiles that strengthen the combined company’s growth potential.
  • To complement AMC’s domestic acquisition strategy, Odeon & UCI establishes a strong and scalable market position in Europe and creates a strong platform for AMC to pursue additional domestic and international growth when it can do so on terms favorable to AMC shareholders.

“With our shared vision for creating a world class cinema experience, we are delighted to be joining the AMC family,” expressed Paul Donovan, CEO of Odeon & UCI. “As an innovator in guest experiences, AMC is the ideal partner for the next stage of our long-term growth in Europe, and this is very exciting news for our guests, our colleagues and the wider film industry. In recent years, Terra Firma has supported our new management team and our transformation strategy, and so established a solid financial footing for the company. We have created strong momentum, and are looking forward to introducing many of AMC’s ground-breaking guest experience strategies, and working with them on long-term initiatives to give our guests the best cinema hospitality experience in Europe. With a strong future film slate, and the unparalleled expertise of our combined teams, there are exciting opportunities ahead and strong prospects for growth.”

Donovan will continue to lead Odeon & UCI from its London headquarters along with his management team. The company will operate as a subsidiary of AMC while retaining its brand names as “Odeon” in the UK & Ireland, “UCI” in Germany, Italy, Austria, and Portugal, and “Cinesa” in Spain. AMC will maintain its headquarters in Leawood, Kansas with Adam Aron retaining his role as CEO and President, and Craig Ramsey as Executive Vice President and Chief Financial Officer.

The Odeon & UCI announcement comes just three days before Carmike shareholders convene to vote on AMC’s bid for the Georgia-based exhibition circuit. AMC announced its intent to acquire Carmike Cinemas for $1.1 billion in March; a vote with shareholders was scheduled for June 30 to approve the deal. That vote was rescheduled for July 15, however, due to opposition from some of Carmike’s major shareholders on the deal’s $30 per share price tag. Aron reiterated his commitment to the Carmike acquisition in a statement following the vote adjournment, but was cautious in tone by noting that the transaction was hanging in the balance because of the impasse on share price.

The tone hasn’t changed since announcing the Odeon & UCI acquisition. “AMC remains committed to moving forward with our plan to acquire Carmike Cinemas,” Aron said in a press release dated July 12. “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. 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.”

AMC states that the Odeon & UCI acquisition will not impact its ability to complete the Carmike transaction. With the backing of China’s Wanda Group, AMC is well positioned to finance and execute both deals. AMC is now poised to become the world’s largest exhibitor irrespective of the fate of the Carmike deal.

“Either way, so be it,” reiterated Aron in the same written statement. “AMC combined with Odeon & UCI, or AMC combined with Odeon & UCI along with Carmike, will be a terrific company.”


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