We all know that the movie industry is big business. This is why major movie productions can cost upwards of $200 million, because they can gross nearly $1 billion. While the numbers corresponding to blockbusters are widely known (largely because of ticket sales), how the movie theater industry does is not so well known.
According to the latest merger announced this year, the movie theater business can be quite lucrative. Theater chain AMC Entertainment will purchase Carmike Cinemas. The deal, reportedly worth $1.1 billion, will form America’s largest movie theater chain with more than 600 theaters and nearly 8,500 screens.
It is also seen as a bold move to consolidate the movie industry, since AMC’s principal stock holder, China’s Dalian Wanda Group, also purchased Legendary Entertainment in January. Legendary is known for producing and financing films.
However, the deal is subject to critique and approval by stockholders as well as federal regulators. It is likely that Carmike’s stockholders may be enamored by the potential increase in value since AMC will be assuming its debt and paying nearly $30 a share for the company, which was up nearly 20 percent from its previous high.
Conversely, federal regulators may believe that the deal may offend antitrust laws, with one company ostensibly owning film financing, production and theatre companies. Having ownership of all instances of a film production pipeline may stifle competition. It remains to be seen how vigorous any dispute will be, but it exemplifies the need for experienced legal counsel to facilitate such a deal.