Amc Buyout

In: Business and Management

Submitted By Jlu1122
Words 8643
Pages 35
UVA-F-1508
Rev. Oct. 5, 2009

THE BUYOUT OF AMC ENTERTAINMENT
In July 2004, Sean Penmeyer, a principal at J.P. Morgan Partners (JPMP, the private equity arm of JPMorgan Chase & Co.), was in the midst of formulating the final terms of a public-to-private buyout proposal for AMC Entertainment Inc. (AMCE). Always alert for new investment opportunities, JPMP had invested in the theater industry before and had started a process earlier that year to learn more about the current state of the market. The interest was prompted by a gradual recovery in theater attendance since the recession and post–September 11 downturn. Big hits in 2002 and 2003 such as Spiderman, Finding Nemo, Lord of the Rings, and
Matrix Reloaded had brought crowds back to the theaters and increased merger and buyout activity in the sector. Through various industry sources, Penmeyer had learned that AMCE might be looking for potential investors. On April 30, 2004, a senior partner at JPMP telephoned Peter
Brown, chairman, president, and chief executive officer of AMCE, to gauge his interest in further discussions with JPMP.
Earlier in the year, AMCE’s board had explored several opportunities to create value for shareholders. Those included acquisitions, strategic combinations with other theater companies, and a possible recapitalization of the company to simplify its capital structure. Several past investments, including a $250 million equity infusion by Apollo Management, L.P., in 2001, had left AMCE with two classes of convertible stock in addition to its publicly traded common shares. It was the board’s belief that a simplified share structure—one with a single class of common stock—would remove the overhang of the preferred shares and more fully align the interests of all of AMCE’s shareholders. Most important, during that conversation, Brown indicated that the board was not…...

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