NCM and AMC Reach Agreement Allowing AMC to Comply with DOJ's Final Order on Carmike Merger
The key terms of the agreement, which is mutually beneficial to both companies and preserves the integrity of AMC's Exhibitor Services Agreement (ESA) with NCM which continues until 2037, are as follows:
Common Unit Adjustment for
-
AMC will receive over 18.4 million units in
NCM LLC as a common unit adjustment for its Carmike acquisition. Because the Carmike theaters were subject to a pre-existing advertising agreement and will not receive advertising services from NCM, AMC will be obligated to make quarterly payments to NCM reflecting the estimated value of the advertising services at the Carmike theaters as if NCM had provided such services. The quarterly payments (integration payments) will continue until the earlier of (i) the date the theaters are transferred to the NCM network or (ii) expiration of theESA with NCM. These quarterly payments are expected to offset the cash impact from the decrease in NCM ownership as a result of the issuance of the units issued for the Carmike theaters.
Transfer of Pre-Show Advertising Provider
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NCM consents to the transfer of advertising rights for 17 theaters by
AMC to
Screenvision, LLC as required by the DOJ's Final Order for a period of 10 years, after which they will revert to NCM.These Transfer Theaters represent approximately 1% of NCM's total network theaters; -
To compensate for NCM's loss of these
Transfer Theaters from its advertising network, AMC will return approximately 2.9 million common units as the ordinary common unit adjustment; plus, an additional approximately 1.8 million units valued at approximately$25 million as compensation for NCM's lost operating income for these theaters during the 10-year term of the DOJ's Final Order. As a result of these transactions, NCM LLC's ownership allocation will change, with AMC owning 24.9%, Cinemark owning 17.5%,Regal Entertainment Group owning 17.9%, and NCM owning 39.7%.
Divestiture of Theaters
- AMC will also sell 17 additional theaters as per the DOJ's Final Order, many of which were previously Carmike theaters. If theaters which were not previously Carmike theaters are sold, then AMC will return an appropriate number of common units to compensate NCM for the loss of those theaters from the NCM advertising network.
- These theaters may be purchased by any theater exhibitor, including those that are currently part of the NCM advertising network. Thus, the impact on NCM of these sales is yet to be determined. However, at most, they represent approximately 1% of NCM's total theater network.
Future AMC Growth
-
As per the
ESA , NCM will continue to benefit from the future growth of the now larger AMC entity under the terms of this long-term agreement, as all new theaters that are built or acquired will automatically become part of NCM's network.
Cooperation on NCM Equity Divestiture and Retention of NCM Equity
- NCM will cooperate with AMC on its required divestiture efforts to ensure an orderly sale and to help maintain the value of NCM stock, including assisting with pre-marketing tasks as well as participation in other efforts to market the stock.
- During the 10-year term of the DOJ Final Order, AMC will retain at least 4.5% (subject to limited exceptions), but not more than 4.99%, of NCM's outstanding common stock and NCM LLC's Common Units, taken together, on a fully converted basis.
Cost Reimbursement
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AMC will reimburse NCM for its incurred and ongoing costs and expenses
related to the agreement between AMC and NCM up to
$1 million .
"AMC will continue to be a great partner to NCM, and I am pleased that
we both remained committed to the preservation of the integrity of the
About
Forward Looking Statements
This press release contains various forward-looking statements that reflect management's current expectations or beliefs regarding future events, including the impact of the common unit adjustment, integration payments, AMC's future growth and the impact on 2017 financial results. Investors are cautioned that reliance on these forward-looking statements involves risks and uncertainties. Although NCM believes that the assumptions used in the forward-looking statements are reasonable, any of these assumptions could prove to be inaccurate and, as a result, actual results could differ materially from those expressed or implied in the forward-looking statements.
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