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AMC-Carmike Merger Gets DOJ Approval, Will ‘Almost Certainly’ Close Before Year-End

Settlement with Department of Justice will require combined chain to divest theaters in 15 markets

AMC Theatres has reached a settlement with the Justice Department that will pave the way for the completion of its $1.2 billion acquisition of Carmike Cinemas, which is expected to happen “almost certainly” before Dec. 31, AMC CEO Adam Aron said in a Tuesday conference call.

“The Department of Justice approval today was the last remaining regulatory hurdle that needed to be crossed,” Aron said.

AMC, owned by China’s Dalian Wanda Group and currently the U.S.’ second-largest theater chain, agreed to buy Carmike, the country’s No. 4 exhibitor, in July in a merger that would create the country’s biggest cinema company with more than 600 theaters. Both companies’ shareholders approved the $1.2 billion deal in November, but it still required regulatory approvals.

The settlement reached with the Department of Justice requires the combined company to divest from theaters in 15 markets where AMC and Carmike both currently operate. The deal also requires AMC to reduce its stake in movie pre-show company National Cinemedia (NCM) and transfer 24 theaters to competitor Screenvision’s network, maintaining competition between the two companies, which the DOJ previously blocked from merging.

“Moviegoers across the United States have benefitted from head-to-head competition between AMC and Carmike that has kept ticket prices in check and delivered a higher quality movie experience,” Acting Assistant Attorney General Renata Hesse of the DOJ’s Antitrust Division said in a Tuesday statement. “Today’s settlement will ensure that movie theatre competition is preserved in 15 local markets where AMC and Carmike currently compete. In addition, by requiring AMC to reduce its equity stake in NCM, terminate its participation in NCM’s business, and transfer screens to Screenvision, the settlement will promote continued vigorous competition between the two leading cinema advertising networks — competition that the division fought to protect when it blocked the NCM-Screenvision merger.”

AMC parent Wanda has been on a buying spree this year — including its purchases of Legendary Entertainment and Dick Clark Productions — which has extended to its U.S. cinema company. AMC completed a separate $1.2 billion acquisition last month, buying Europe’s largest chain, Odeon & UCI, making AMC the largest theater company in the world.

On Tuesday’s call, Aron said the company plans to keep two distinct brands and use them to differentiate product lines and operating standards. To that end, Aron expects that more than 50 AMC theaters — mostly with lower visitation — will become cinemas of a different brand, and more than 100 Carmike theaters will “graduate” to AMC.

“The closing on this transaction is imminent,” Aron said on the call.

Not everyone is applauding the deal, however. Richard Berman, a former lobbyist who’s marshaled opposition to China’s Hollywood spending — and particularly Wanda Group’s acquisitions — released a statement calling for further review of the deal.

“The Department of Justice decision will surely be celebrated by China’s Communist elites, who have close ties to Dalian Wanda and are more interested in on-screen messages than selling popcorn, candy, and drinks,” Berman said in the statement. “The approved AMC-Carmike merger is a blatant attempt by Wang Jianlin and his government investors to control U.S. public opinion through movie production and distribution pressures, despite his claims to the contrary. The failure of the anti-trust review to acknowledge these pressures is predictable. Hopefully, more targeted national security concerns by the Obama administration will trigger a supplemental review from the Committee on Foreign Investment in the United States (CFIUS).”