Published reports place deal's value at $1.4 bil
This article was updated at 10:26 p.m.
NEW YORK — The last big fish in the exhibition industry could be reeled in soon as a second round of financial players churns the waters of the reinvigorated biz.
AMC Entertainment shares surged 23% Tuesday on reports that JPMorgan Partners is close to buying the nation’s No. 2 chain, which is controlled by Apollo Management. Published reports placed the value of the deal at $1.4 billion, but analysts said it could be up to $2 billion.
Flipping movie theater chains has become a favored pastime of buyout firms, a handful of whom bought into the industry at the bottom and reaped big bucks as it nursed itself back to health. Many of those firms are looking to take their profits and move on.
Now, another group of financial players, attracted by the chains’ steady cash flows, are moving in. In some cases, the second round of buyers sees opportunity in further consolidation of the industry or in overseas expansion.
It’s a bizarre phenomenon, said one media banker. Buyout firms “never used to do that. They’d think, I don’t want to make the other guy rich and look stupid,” he said.
KKR, which bought Regal and presided over an ill-advised building boom, lost its shirt to Philip Anschutz, who acquired Regal, the largest chain, on the cheap by buying up bonds of the bankrupt company.
The sector, most of whose top players now are owned by buyout firms, is an anomaly in the entertainment biz.
AMC’s controlling shareholder, Apollo Management, acquired its chunk of the exhib in 2001, allowing AMC to avoid filing for bankruptcy as most of its peers toppled into Chapter 11.
Kansas City-based AMC also had considered acquisitions and held merger talks with Loews late last year, but the discussions broke down in January.
“It’s been no secret that the Apollo Group has looked for various ways to monetize their holding in AMC,” said Jeff Logsdon of Harris Nesbitt Gerard.
Deal would value AMC at $19-$20 a share and includes the assumption of debt.
AMC stock closed up 23.07%, or $3.28, at $17.50.
Last month, Loews Cineplex owners Onex Corp. and Oaktree Capital sold the Gotham chain to financial players Bain Capital, Carlyle Group and Spectrum Equity for $1.46 billion.
In March, Madison Dearborn Partners bought the Cinemark theater chain from Cypress Group for about $1.5 billion. Potential pricetag on the AMC purchase is in line with to slightly lower than that on the other two deals, analysts said.
Reps for AMC and Apollo declined to comment. A rep for JPMorgan wasn’t immediately available Tuesday.
Several Wall Streeters said AMC execs have been dodging their calls for weeks, and speculated that other buyers — mostly financial — could enter the fray.
The exhibition sector was hammered in the late ’90s after a multiplex building spree left the top chains burdened with too much debt.
AMC, with 3,500 screens, was a pioneer of the multiplex. It boasts the highest average number of screens per location at 15. Regal is the nation’s No. 1 exhib with more than 6,000 screens.