AMC Entertainment (NYSE: AMC) has agreed to acquire Odeon & UCI Cinemas from private equity investor Terra Firma in a transaction valued at £921 million, allowing Terra Firma to exit an investment from 2004. After the U.K.’s vote to leave the EU resulted in a weakened British pound, a play for Europe’s largest cinema operator became that much more appealing to AMC.
CEO and president Adam Aron called the deal “opportunistic” in a press release. “While we acknowledge that there are some uncertainties related to Brexit," he said, "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 this way, the deal demonstrates that M&A opportunities still exist in both the U.K. and the EU despite a situation that will remain deeply uncertain into the foreseeable future.
The transaction comprises roughly £500 million in equity and the assumption of £407 million of net debt, targeting leverage in the near term of 4x adjusted EBITDA.
AMC’s primary goal for the acquisition is to foster long-term growth in Europe. Odeon & UCI—which had approximately $1.16 billion in revenue for the 12 months ended March 31—operates 242 cinemas and 2,236 screens in the U.K. and six other European countries, including Spain, Italy and Germany. With the addition, AMC will become the largest movie-theater operator in the world, with a network of 627 theatres and more than 7,600 screens in eight countries.
And that's before considering AMC's agreed-upon deal to acquire Carmike Cinemas (NASDAQ: CKEC) for a proposed $1.1 billion, a transaction that entered apparent flux in recent weeks due to concern over the $30-per-share sale price.
AMC has been on a buying spree since it was acquired by Chinese conglomerate Dalian Wanda for $2.6 billion in 2012 and was taken public the following year. The company said that the Odeon & UCI transaction does not impact its ability to complete the deal for Carmike, as it has the financing commitments and flexibility to do both.
“We have said all along that AMC is a disciplined buyer, and that very much continues to be the case,” AMC’s Aron remarked in a press release. "... But we again note that the financial metrics surrounding the Carmike acquisition get marginal very quickly above the $30 deal price."