AMC Entertainment closes on $600 million investment from Silver Lake

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AMC Entertainment Holdings entered into an agreement with leading technology investment company Silver Lake, AMC has issued $600 million senior unsecured convertible notes due 2024, bearing interest at 2.95% and convertible into AMC Class A common shares at $20.50 per share, before giving effect to the special dividend.

At $20.50 per share, the pre-dividend conversion price reflects a 17.1% premium to the reference price. The convertible notes were issued on Sept. 14, 2018.

A portion of the proceeds from the convertible notes has been used to repurchase 24,057,143 AMC Class B common shares from Dalian Wanda Group Co., Ltd., which represents 31.7% of the AMC Class B common shares held by Wanda, at a price of $17.50 per share. Wanda now owns 51,769,784 AMC Class B vommon shares. 

A portion of the proceeds from the convertible notes will also be used to pay a $1.55 per share special dividend on Sept. 28, 2018 to all AMC Class A common and Class B common shareholders of record as of Sept. 25, 2018. The remainder of the proceeds will be used for transaction expenses and general corporate purposes. 

As part of the transaction, Silver Lake will appoint one director to the AMC board of directors. AMC has also agreed to add a new independent director to its board who will have significant technology experience and knowledge, with support from Silver Lake. Additionally, Silver Lake has a two-year right of first refusal on certain future transfers of AMC shares by Wanda.

Adam Aron, AMC CEO and president, said, “We are very excited to welcome a new, highly sophisticated investor with a great track record of success. Silver Lake believes in the inherent value of AMC now, and in the likelihood of AMC’s success going forward resulting from our global leadership position and our proven growth strategies. We expect that Silver Lake will add significant value to AMC as it comes into our boardroom, given its longstanding experience and savvy in the technology and media sectors.”

Aron continued, “We are also truly pleased that Wanda is continuing with its longstanding commitment to AMC. Wanda’s majority ownership began in 2012, and they are expected to remain a sizable and supportive shareholder for AMC into the future. Wanda has been a terrific shareholder, and I have the highest respect and affection for the Wanda executives with whom we regularly interact.”

Aron added, “We believe the intricacies and deployment of the convertible notes we have chosen are particularly compelling. Importantly, this transaction is accretive from a free-cash-flow perspective in 2019 and beyond, as the interest expense arising from these new convertible notes is more than fully offset by the cash-dividend savings on the shares we have repurchased from Wanda. The spread between the $17.50 per share repurchase price from Wanda and the equity conversion price for Silver Lake is also appealing. The transaction also eliminates the uncertainty and share-price volatility surrounding any potential offering at this time of Wanda’s shares directly into the market. Additionally, we also believe that all of our shareholders will benefit from the $1.55 per share special dividend being paid a few weeks from now.” 

Lee Wittlinger, a Silver Lake managing director who will join the AMC board of directors, said, "We are excited to partner with AMC, the global leader in film exhibition with nearly a century of history, and its highly talented management team led by Adam Aron." He added, "AMC's category-leading investment in enhanced customer experience, geographic expansion, as well as innovation around the customer engagement model—including the highly successful recent launch of the AMC Stubs A-List program—has set the company up for long-term success. We look forward to helping AMC continue to leverage technology to serve its moviegoers and studio partners around the world."