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/
