Loews, AMC talk merger

Union would create exhib with nearly 5,700 screens

HOLLYWOOD — Loews Cineplex owner Onex and AMC Entertainment issued separate statements Wednesday confirming preliminary talks about a possible merger of their movie circuits.

Confirmation follows by one day word from industry sources that exhibs’ on-off mating dance has again heated up (Daily Variety, Nov. 19).

Onex, a diversified Canadian conglom, and AMC acknowledged preliminary discussions about a possible business combination. But it remains unclear how a merger would be effected.

AMC is publicly traded. Loews is a subsid of Onex with L.A. buyout firm Oaktree Capital aboard as a minority investor. One scenario would see Onex’s theatrical assets folded into AMC, but other merger mechanisms are possible.

AMC, which has retained Salomon Smith Barney to rep it in talks with Loews, is considered well situated to fund an acquisition.

In a recent research report, Bear Stearns estimated AMC’s cash balance at about $261 million and rising, with some $344 million in useable cash expected to be generated by the end of fiscal 2004.

“Uses of this cash include acquisitions,” noted the report from analysts R. Glen Reid and Roger Lengyel.

News of the discussion comes against a backdrop of dramatic recent consolidation in the exhib industry. Combining AMC’s 3,507 screens and Loew’s nearly 2,200 would create a circuit only a bit smaller than the 6,100 screens operated by No. 1 U.S. exhib Regal Entertainment. The creation of companies with such mass is virtually unprecedented, but follows a period of broad financial instability in exhibition, with the surviving entities hoping to create greater economies of scale in operations.

Regal also remains in the hunt for more screens. And other exhibs such as Cinemark and Carmike are considered potential buyers or sellers in the marketplace.

AMC shares climbed 25¢ to $14.30 Wednesday. Regal shares rose 24¢ to $20.24.

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