NEW YORK — AMC Entertainment agreed Thursday to sell itself in a deal worth $2 billion to an investment company owned by JPMorgan Partners and Apollo Management, continuing the buyout feeding frenzy in the once-troubled exhib industry.
Marquee Holdings, jointly owned by JPMorgan, the private equity arm of JPMorgan Chase & Co., and Apollo will acquire all the outstanding shares of AMC Entertainment for $19.50 a share, a 37% premium over Monday’s closing price.
Apollo is currently the controlling shareholder in AMC.
Under the terms of the deal, JPMorgan gets 50.1% of the company and Apollo keeps 49.9% after reinvesting “a substantial portion” of its current holdings back into the company. The price paid includes $1.67 billion in equity, $748 million in debt and $399 million in cash.
AMC shares closed up 11% on Thursday, rising $1.90 to $19.10 a share on the American Stock Exchange.
The buyout is the latest deal by a new crop of buyout firms rushing to the multiplex.
The exhibitor industry is shaking off a bad hangover from the ill-timed investments of the ’90s that caused a rash of bankruptcies after ticket sales dropped off in 2000-2001.
The ailing distribs were snapped up by buyout firms and now that they’re enjoying a second year of strong box office revenue, those first strategic buyers are looking to cash out, making way for a second round of financial players, who in turn are looking to cut costs out of the businesses, build equity, and spin them off to the public once again.
The buyout, structured as a merger, allows Apollo to cash out part of an investment that began in 2001 when it infused capital into the company to help it avoid Chapter 11. “This was an elegant solution for all parties, including shareholders,” said Anthony DiClemente, media analyst at Lehman Brothers.
AMC management will stay in place, but JPMorgan will be looking for efficiencies and ancillary revenue streams, such as increased theater advertising, which DiClemente predicts will become a $50 million business for AMC’s bigger rival, Regal Entertainment, controlled by Philip Anschutz.
The buyout comes after talks broke down in January between AMC and Loews intended to create a rival on the scale of Regal’s 6,000 screens.
AMC, the No. 2 U.S. exhib chain and pioneer of the multiplex, has 3,500 screens.
In acquiring AMC, JPMorgan gets a business on the upswing, which booked a record $489 million in sales for the quarter just ended, a 4% increase from $472 million in the same quarter last year.
Attendance stayed flat but results were buoyed by a 4.5% average ticket price increase and lower film costs compared with last year.
Film group chairman Richard Walsh said film costs dropped due to the success of smaller films, such as “Mean Girls, ” “Dodgeball,” and “The Passion of the Christ,” which were cheaper to acquire than blockbusters. “You’re seeing lower-cost films outperforming what they usually do in the marketplace,” Walsh said.
If completed, the buyout would be the third deal involving a theater chain this year. Investors led by Bain Capital bought Loews Cineplex, the No. 4 chain, last month for $1.46 billion. Madison Dearborn Partners bought Cinemark, the No. 3 exhibitor, for $1.6 billion in March.
Shares in Carmike Cinemas, the No. 5 chain and one of the last still publicly traded, spiked after the deal was announced, and closed nearly 4%higher on the Nasdaq exchange.