AMC Purchase By Wanda in China: Driving Up Value in Theater Values (CNK, RGC, CKEC)

There is one M&A transaction which is flying under the radar today and the reality is that shouldn’t get lost in the shuffle.  Dalian Wanda Group out of China is acquiring the great U.S. film chain of AMC Entertainment.  The deal is valued at some $2.6 billion for the chain of movie theaters.

Wanda is transforming into a global cinema chain owner with this now culminating two of the world’s largest movie markets.  Wanda is private and most recently had more than $16 billion in annual sales from its commercial development and entertainment operations.  It currently owns some 86 theaters in China which was a total of about 730 movie screens.

So, here is Wanda is getting: 346 multiplex theaters located mostly in North America and a total of just over 5,000 movie screens.  This comes to a value of almost $517,000 per screen or just over $7.5 million per theater on average.

Cinemark Holdings Inc. (NYSE: CNK) operates 459 theatres with 5,181 screens in the United States and in the Americas.  It has a market value today of $2.6 billion and shares are up almost 1% at $23.09 against a 52-week range of $17.10 to $24.45.  That value is roughly the same as the AMC deal today.  The value here is almost $502,000 per screen or just over $5.65 million per screen.

Regal Entertainment Group (NYSE: RGC) recently said that is the largest and most geographically diverse theatre circuit in the United States: 6,580 screens in 522 theatres in 37 states and D.C. as of April 26, 2012.  Shares are up 3.3% at $14.04 against a 52-week range of $11.15 to $14.74 and its market value is listed as $2.16 billion as of now. This value is about $328,000 per screen and about $4.13 million per theater.

Carmike Cinemas Inc. (NASDAQ: CKEC) is the baby of the group with a market value of only $262 million.  As of December 31, 2011, it owned, operated, or had an interest in 237 theatres with 2,254 screens located in 35 states. Shares are up 3.4% at $14.79 against a 52-week range of $5.14 to $15.80.  The value here is down at about $116,000 per screen or about %1.1 million per theater.

Whether or not this drives up the price of feature films will only be known through time, and that may depend upon the movie studios more than the actual theaters.  Still, the value of movie screens and movie theaters just went up.

Not bad considering that the lion share of profits for theaters come from selling popcorn, food, fountain drinks, and candy.

JON C. OGG