J.P. Morgan to pay $2 billion for AMC movie-theater chain

Investment houses foresee big bucks in big screens

July 23, 2004|By BLOOMBERG NEWS

KANSAS CITY, Mo. - J.P. Morgan Chase & Co.'s buyout unit agreed yesterday to acquire a majority stake in AMC Entertainment Inc. for $2 billion and plans to take the movie chain private.

Marquee Holdings Inc., a joint operation of private equity firm J.P. Morgan Partners LLC and AMC's current majority owner, Apollo Management LP, plans to buy the company and take it private, paying stockholders $19.50 per share for 50.1 percent of AMC, the companies said. The New York bank also will assume $748 million in debt.

Apollo will hold the other 49.9 percent, and its existing management would continue to run the company.

The AMC agreement is the latest theater-company deal for J.P. Morgan Partners, which owns a stake in Cine-UK and invested in Imax Corp. and Mexico's Grupo Cinemex SA during the 1990s. AMC has more than 3,500 screens in the United States, Europe and Asia. The sale is expected to close in the fourth quarter, the companies said.

Investment firms such as Bain Capital Inc. and Madison Dearborn Partners LLC are snapping up movie-theater chains for their profits from ticket and concession sales. The firms may have spotted an opportunity others have missed, one analyst said.

"It's not a mature business yet," said Banc of America Securities analyst Michael Savner. "Shame on public investors who have been slow to embrace the group."

On Tuesday, after a report on the talks appeared in the New York Post, AMC's shares soared 23 percent to $17.50. They jumped $1.94, or 11.3 percent, yesterday to close at $19.10 on the American Stock Exchange. They were selling at $17.16 on the American Stock Exchange yesterday before trading was halted for the announcement.

J.P. Morgan, the second-biggest U.S. bank, fell 4 cents to close at $36.78 on the New York Stock Exchange.

AMC also said yesterday that its fiscal first-quarter earnings beat analysts' expectations. The company said it earned $8.8 million, or 17 cents per share, in the period that ended July 1, compared with $2.7 million, or 7 cents per share, in the same period last year. Analysts had expected earnings of 15 cents per share.

Revenue increased 4 percent to $489 million during the quarter, which includes the beginning of the all-important summer movie season.

AMC said the deal includes $1.67 billion in equity and the assumption of $748 million in debt less $399 million in cash and equivalents.

Investors led by Bain Capital bought Loews Cineplex, the No. 4 chain, last month for $1.46 billion. In March, Madison Dearborn Partners bought Cinemark Inc., the No. 3 theater chain, for $1.6 billion.

AMC operates 232 theaters with 3,554 screens in the United States, Canada, France, Hong Kong, Japan, Portugal, Spain and the United Kingdom. The company had revenue last year of $1.8 billion.

The Associated Press and Bloomberg News contributed to this article.

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