AMC (NYSE: AMC) CEO Adam Aron hinted to shareholders Thursday that the movie theater chain may be contemplating mergers to consolidate the beleaguered sector, in addition to other options.
In an interview this morning on CNBC, Aron highlighted that the company is asking shareholders to approve the authorization of another 500,000,000 common shares, which would double the authorized shares to a total of 1,024,173,073.
Aron said, while cognizant of dilution, the company may sell more stock to bolster cash reserves or pay down debt, he also said the shares could be used as currency in a stock-for-stock merger.
While it is unclear if AMC is evaluating a merger of U.S. rival Cinemark (NYSE: CNK), shares of the two largest U.S.-traded theater chains are notably trading in opposite directions today - with AMC down 5% and CNK up 5%.
Based on the current market value of AMC at approximately $4.9 billion, it is theoretically possible that AMC could use the extra shares to pursue a stock-for-stock takeover of Cinemark, which has a market value of approximately $2.5 billion. A merger between the two, which may have been frowned upon by antitrust regulators pre-COVID, could be more of a reality as movie distributors like Disney and Waner Bros. are going direct-to-consumer with some of their releases.
During the interview, Aron also admitted the company was close to running out of cash five times due to the pandemic. Aron said since the pandemic the company has raised $2.8 billion and received another $1 billion in concession from lenders and landlords.
The CEO was positive that the vaccine roll-out will bring moviegoers back to his theatres and noted that last night's attendance for the new release Godzilla vs. Kong was 10x all the other Wednesdays this year.
Aron also thanked retail investors, including those on Wallstreetbets, for saving the company and taking bankruptcy 'completely' off the table. He said maybe the strong start to the Kong - a movie about "apes" - was a good omen, alluding to the self-deprecating term "apes" WSB traders sometimes refer to themselves as.
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