Long-Time Partners to Both Benefit from Common Unit Adjustments,
Transfer and Divestiture of Theaters, and Ongoing Cooperation
CENTENNIAL, Colo.--(BUSINESS WIRE)--
National CineMedia, Inc. (NCM) and American Multi-Cinema, Inc. (AMC)
have reached an agreement that enables AMC to comply with the Department
of Justice's (DOJ) Final Order on its acquisition
of Carmike Cinemas, Inc. while reaffirming the companies' commitment to
their continued partnership.
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 Acquired Carmike Theaters
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 the ESA 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
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
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.
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
ESA throughout this process," said Andy England, CEO of National
CineMedia. "This agreement is a win for both of our companies and our
shareholders, and is not expected to have a material impact on our
financial results in 2017. In fact, we have already signed several new
affiliate partners that more than compensate for any AMC attendance
losses as a result of the settlement with the DOJ and look forward to
welcoming them to the #1 Millennial weekend network in America."
About National CineMedia (NCM)
National CineMedia (NCM) is America's Movie Network. As the #1
Millennial weekend network in the U.S., NCM is the connector between
brands and movie audiences. More than 700 million moviegoers annually
attend theaters that are currently under contract to present NCM's
FirstLook pre-show in over 40 leading national and regional theater
circuits including AMC Entertainment Inc. (NYSE:AMC), Cinemark Holdings,
Inc. (NYSE:CNK) and Regal Entertainment Group (NYSE: RGC). NCM's cinema
advertising network offers broad reach and unparalleled audience
engagement with over 20,500 screens in over 1,600 theaters in 189
Designated Market Areas® (all of the top 50). NCM Digital goes beyond
the big screen, extending in-theater campaigns into online and mobile
marketing programs to reach entertainment audiences. National CineMedia,
Inc. (NASDAQ:NCMI) owns a 43.7% interest in, and is the managing member
of, National CineMedia, LLC. For more information, visit www.ncm.com.
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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National CineMedia (NCM)
National CineMedia (NCM)
Source: National CineMedia, Inc.
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