NEW YORK, July 15, 2016 /PRNewswire/ -- Mittleman Brothers,
LLC, one of the largest shareholders of Carmike Cinemas Inc.
(NASDAQ: CKEC), which currently controls approximately 2.33 million
CKEC shares, 9.6% of the total shares outstanding, is disappointed
by the announcement made last night that the Special Meeting of
Carmike shareholders (the "Meeting"), already once delayed from its
originally scheduled date of June
30th, 2016 until today, is being delayed yet
again, now to July
25th. Another delay would not be concerning
if the intent behind it was to negotiate a truly fair deal, but
that is not what we're hearing.
We are dismayed by stories in the press and rumors conveyed by
other shareholders that AMC Entertainment ("AMC") is using these
delays to actively court certain short-term oriented shareholders
(arbitrageurs / event driven funds) that might be enticed by the
rumored prospect of only a meager bump up in the merger
consideration from $30 to around
$33 per share, and that these
shareholders are being told of a prospective change in the record
date (currently May 18th)
that would empower their increased interests with the right to vote
at the Meeting. We believe that the rumored bump up to
$33 per share, if forthcoming, would
still be grossly inadequate consideration, with or without a stock
component. It would be a cynical lure to quick-buck artists,
but otherwise a non-starter that any sentient shareholder should
reject emphatically. We would view any change in the record date to
be utterly indefensible and likely to provoke litigation.
In response to our repeated claims that $40 per share represents a bare minimum fair
value for CKEC, AMC's CEO was recently quoted by Bloomberg news as
saying, "There is only one thing I am certain of in life, they are
not going to get $40 a share from
AMC." The implication being that $40 per share is somehow unreasonable,
unattractive, and unacceptable to a disciplined buyer. Yet
that is blatantly untrue.
$40 per share for CKEC is an
EV/EBITDA multiple of 7.9x post-synergies adjusted EBITDA of
$170M, and only 6.4x EBITDA after
further adjusting down the cost for the estimated $260M in additional shares of National CineMedia
Inc. that AMC will receive (tax free, due to their NOLs) as a huge
side benefit to the acquisition. Three days ago AMC touted
its acquisition of Odeon & UCI Cinemas Group ("Odeon-UCI") in
the U.K., which is a substantially less profitable operator than
Carmike (their EBITDA margin is roughly two percentage points less
than Carmike's), for a post-synergies multiple of 9.0x.
So how can $40 per share for
Carmike (6.4x EBITDA cost to AMC) be unthinkable in one's lifetime,
but paying 9.0x EBITDA three days ago for a substantially less
profitable enterprise is somehow a "bargain" as AMC called
it?
This posturing is preposterous, with brazen disregard for these
easily discernible facts. Even sell-side analysts have
confirmed the attractiveness of the CKEC acquisition to AMC, with
B. Riley & Co. analyst Eric Wold
citing "…projected accretion at higher levels into the high
$40s..." in a report dated June
30th.
This highly unusual, perhaps unprecedented circumstance of one
company (AMC) buying two major players in the same industry (CKEC
and Odeon-UCI), of comparable size, economic characteristics, and
prospects, at the same time, but for vastly disparate
valuations, defies logical explanation.
Were Carmike's Board to endorse a record date change under these
specious circumstances, we would view that action as a clear
violation of their fiduciary duty and loyalty to shareholders, and
would strongly consider taking legal action to hold Board members
personally accountable for such an unnecessary accommodation to
AMC's attempt to buy Carmike's shares at a price that we've shown
to be ridiculously inadequate. We would also consider seeking
immediate injunctive relief in Delaware to halt such an unjustified change in
the record date.
We sincerely hope that our concerns are unfounded, and that
these rumored prospective actions are untrue, but given the lack of
fairness we've perceived in both process and price since the day
that the merger was announced, we are very concerned by the recent
press reports.
That AMC would pay 9.0x EBITDA post synergies for the less
profitable Odeon-UCI, but only 5.0x EBITDA post synergies for
Carmike at $30 per share, is nothing
short of a slap in the face to CKEC shareholders. And some
modest, incremental tweaking of that absurd valuation will not
remotely suffice to cure it.
We have no desire to negotiate in public, nor do we feign to
speak for all Carmike shareholders, but we felt compelled to
address the recent stories in the news and to clarify our position
on these issues in light of the continuing delays of the Meeting
and in response to the questions we've received from numerous other
Carmike shareholders and the press.
That said, we would very much like to be shareholders in a
combined AMC – Carmike, as we have conveyed both publicly and
privately to AMC's management, but only at a price that at least
approaches some semblance of fair value. To that end, we
would embrace an offer of $37.50 per
share, if 50% of the consideration would be AMC stock. Given
that AMC offered $37.00 per share in
a similar cash and stock transaction in March 2015 (granted under a different CEO, and
the offer was withdrawn), on the heels of a weak 2014 in which CKEC
reported only $98.3M in adjusted
EBITDA, given Carmike's record results of $135M in adjusted EBITDA in 2015, which they are
on track to exceed in 2016 and 2017, we think $37.50 per share is beyond a reasonable
concession for CKEC to make in order to participate in the merged
entity.
Mittleman Brothers again encourages all Carmike Cinemas'
shareholders to review our most recently filed presentation
highlighting the gross deficiencies in both process and price
reflected in Carmike's proposed sale to AMC. As we point out
in the presentation
http://www.mittlemanbrothers.com/ckecamc-opposition, CKEC has
out-performed its peer group over the past seven years under
current management, in sales, EBITDA, attendance, and concessions
growth, and yet merely valuing CKEC at the mean EV/EBITDA trading
multiple of the peer group yields a stock price in excess of
$40 per share, without even
considering a control premium, or the immense synergy value that
AMC would solely retain in this unusually rare consolidation
opportunity pairing the second and fourth largest movie theaters
chains in the U.S.
Mittleman Brothers again urges all Carmike Cinemas shareholders
to vote "AGAINST" this terribly unfair merger proposal before
Carmike's postponed Special Meeting on July
25th.
This press release is provided for informational purposes
only. Mittleman Brothers, LLC does not undertake any duty to
update the information set forth herein. Mittleman Brothers
is not soliciting proxies relating to the CKEC shareholder meeting
and does not have the authority to vote your proxy. Mittleman
Brothers urges CKEC shareholders to vote against the proposed
transaction.
The information and calculations included in this press
release are based on information reasonably available to Mittleman
Brothers, LLC as of the date hereof. Furthermore, the information
included in this press release has been obtained from sources that
Mittleman Brothers, LLC believes to be reliable. However, these
sources cannot be guaranteed as to their accuracy or completeness.
No representation, warranty or undertaking, express or implied, is
given as to the accuracy or completeness of the information
contained herein, by Mittleman Brothers, LLC, its members or
employees, and no liability is accepted by such persons for the
accuracy or completeness of any such information.
This press release contains certain "forward-looking
statements," which may be identified by the use of such words as
"believe," "expect," "anticipate," "should," "planned,"
"estimated," "potential," "outlook," "forecast," "plan" and other
similar terms. Examples of forward-looking statements include,
without limitation, estimates with respect to financial
condition, results of operations, and success or lack of success.
All are subject to various factors, including, without limitation,
general and local economic conditions, changing levels of
competition within certain industries and markets, changes in
interest rates, changes in legislation or regulation, and other
economic, competitive, governmental, regulatory and technological
factors, any or all of which could cause actual results to differ
materially from projected results. The information set forth in
this press release does not constitute legal, tax, investment or
other advice, or a recommendation to purchase or sell any
particular security.
About Mittleman Brothers, LLC:
Mittleman Brothers,
LLC, through its wholly-owned subsidiary, Mittleman Investment
Management, LLC, is an SEC-registered investment adviser that
provides discretionary portfolio management for high net worth
individuals and institutions. For more information on the
firm and its services, please visit our website at
www.mittlemanbrothers.com or contact Evan Newman at 516.686.6200.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/mittleman-brothers-llc-opposes-2nd-postponement-of-shareholder-vote-on-amcs-proposed-acquisition-of-carmike-cinemas-warns-against-record-date-change-300299440.html
SOURCE Mittleman Brothers, LLC