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Driehaus Calls Carmike Cinemas, Inc. (CKEC) Buyout Flawed

Driehaus Calls Carmike Cinemas, Inc. (CKEC) Buyout Flawed by Activist Stocks

The full Driehaus Capital presentation about how the AMC Entertainment offer undervalues Carmike Cinemas. They own 9.9%.

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Driehaus Calls Carmike Cinemas, Inc. (CKEC) Buyout Flawed – Executive Summary

1. Deeply flawed and shareholder unfriendly sales process

  • Despite prospective conflicts of interest, Board failed to create a special committee of independent directors
  • Zero effort to survey financial buyers-including failure to even respond to inbound indications of interest
  • Failure to negotiate a ’go-shop’ period
  • Inclusion of a ‘Negotiating Period’ which essentially acts as de facto matching right

2. Change in control premium is grossly inadequate-substantial wealth transfer from Carmike Cinemas to AMC

  • Change of control premium of 19.5%, by far the lowest among strategic cash deals in 2016
  • Values shares at 13.2% discount to 52-week high, by for the worst among strategic cash deals in 2016
  • Vast majority of value accrues to AMC shareholders- AMC’s gain in market cap of $374mln in the week following deal announcement compares to just a $1 19min total ‘premium’ for Carmike shareholders

3. Deal values Carmike at an egregious discount to comparable transactions by all relevant measures

  • On effective EV/EBITOA basis, transaction values Carmike at 4.5x, a $096+ discount to comparable transactions
  • On an EV/Screen basis, transaction values Carmike at 33Wscreen, a 6015+ discount to comparable transactions
  • On ’apples to apples’ basis, transaction values Carmike at a 50’“ discount to Wanda’s 2012 acquisition of AMC

4. Unhinged sales process and hyper-discounted valuation characteristic of a ‘distressed’ or ‘forced’ seller, not a company posting robust growth and record-breaking EBITDA like Carmike

  • Carmike has posted a string of record-breaking quarters, and has best-in-class growth profile; over the last three years, Carmike’s box office per screen growth has exceeded peers by a wide margin (18.5% vs. 4%) and its concessions per patron growth a] 25. 7% is also tops among peers over the same period
  • Explosive EBITDA growth runway: Untapped opportunities like expansion of alcohol service and upgraded menu, ‘tax on top’ initiative, renegotiation of studio scale deals, and myriad ’ripe’ accretive bolt-on opportunities http://www.newocr.com/

Carmike Cinemas

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