UPDATED: A court allowed AMC Theatres on Friday to reacquire 10 theaters it had divested as part of the Carmike Cinemas merger, after the new operator was forced to liquidate due to the COVID-19 pandemic.
U.S. District Judge Randolph D. Moss granted the theater chain’s unopposed motion one day after it was filed.
“The COVID-19 pandemic has caused extreme economic hardship in the movie theater industry, and the proposed amendments are necessary to ameliorate additional harm to the industry,” Moss wrote.
Three years ago, AMC agreed to divest 15 theaters in nine states in order to win Department of Justice approval for the merger, which made it the largest chain in North America. AMC and Carmike were the two major competitors in those 15 markets, and the DOJ feared that without a divestiture, AMC would hold a monopoly that would harm consumers.
The cinemas were acquired by New Vision Theatres, a firm that launched in 2017 with the backing of Beekman Investment Partners, a private equity firm.
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But New Vision, like every other cinema operator, was forced to shutter its theaters in the spring due to the pandemic. On July 6, the firm filed a notice with the Muscogee County, Ga., recorder’s office that it would liquidate.
AMC filed a motion in the federal antitrust case on Thursday, asking for permission to reacquire 10 of the theaters provided that the DOJ also approves.
According to the motion, AMC remains financially liable to the landlords of those theaters, and is looking to mitigate the damage.
At the time of the divestiture in 2017, the landlords either refused to release AMC from its lease obligations, or required AMC to guarantee payment in the event that New Vision defaulted. Now that New Vision is liquidating, seven of the 10 landlords have either sued AMC or indicated they will seek recovery from AMC for unpaid rent.
In the motion, AMC argued that allowing it to take over those theaters would increase the likelihood that they can remain in business, which it argues would be in the public’s interest.
“Absent such modification, many of the divested theatres might remain shuttered permanently,” the motion states. “Because the proposed modifications allow AMC to reacquire only certain theatres that otherwise would likely exit the market, the proposed modifications will not adversely impact competition.”
Moss agreed that the amended terms were narrowly circumscribed, noting that AMC is only seeking to take over theaters where it is on the hook because New Vision has defaulted.
“The Court determines that entry of the amended final judgment is in the public interest,” Moss wrote.
The 10 theaters include six former Carmike locations, in Oakdale, Minn., Mounds View, Minn., Miramar Beach, Fla., Fleming Island, Fla., Montgomery, Ala., and Sparta Township, N.J. It also includes four former AMC locations in Allentown, Pa., Lawton, Okla., Pekin, Ill., and Fitchburg, Wis.