Regal Entertainment Group Considering Sale

News sends stock skyward as nation’s largest theater chain posts bleak Q3 earnings results

Regal Entertainment Group is exploring “strategic alternatives” that could include a sale of the company, the nation’s largest theater chain said Monday.

Shares of Regal stock were up 2 percent to $20.51 and soared 15 percent on the news after the close of regular trading.

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Regal’s Board of Directors said it has retained Morgan Stanley & Co. as its financial adviser for “the exploration of strategic alternatives to enhance shareholder value, which may include a potential sale of the company.” It set no timetable for a move and said a sale was not guaranteed.

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The announcement came in a third quarter earnings report that fell short of analysts’ estimates. The summer was a tough one at the box office, with revenues off roughly 15 percent from last year, and this September was the worst in six years.

Regal’s net income for the period was $26.7 million, a 65 percent tumble from the $75.1 million that the company reported in the third quarter of 2013. Revenues at the Knoxville, Tenn.-based circuit fell nearly 15 percent to $693.8 million for the quarter ending in September compared to $813.1 million for the year-ago period.

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The company reported earnings per share of 18 cents, compared with 38 cents for the same period a year ago, while EBITDA fell from $177.3 million to $122.1 million.

Analysts have predicted earnings of 20 cents per share and revenues of $724.1 million for Regal, which operates the largest theater circuit in the United States, with 7,347 screens in 573 theaters in 42 states.

To soften the blow for shareholders, Regal announced a quarterly dividend of 22 cents plus a special cash dividend of $1 per Class A and Class B common shares.

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“The combination of Regal’s continued strong performance and attractive industry dynamics has led the board to conclude that this is an opportune time to conduct a thorough review of options,” the company said in its earnings release.

That timing for a move could be good because 2015 is expected to be a blockbuster year, with “Avengers: Age of Ultron,” “Jurassic World,” ‘Star Wars: Episode VII” and the 24th James Bond movie among a list of heavyweight films set for release.

“Delivering shareholder value has been the cornerstone of our strategy for many years and we believe today’s announcement along with the declaration of our sixth special dividend clearly demonstrate that commitment,” said Regal’s chief executive Amy Miles. “Looking ahead, we are optimistic regarding the potential for box-office success during the upcoming holiday season and throughout 2015.”

China’s Wanda Group bought AMC Entertainment, which operates the nati0n’s second-largest theater chain and is Regal’s top rival, for $2.6 billion in 2012.