AMC CEO Adam Aron Hints At Movie Theater M&A Opportunity After Court Ruling

One of the largest movie theater companies in the world is facing a significant fine after calling off a planned merger in 2020. The company’s biggest rival took to Twitter Inc TWTR to say the litigation could present a business opportunity. 

What Happened: The Ontario Supreme Court of Justice found that Cineworld repudiated a transaction to acquire Cineplex. The court announced damages in the amount of CA$1.24 billion ($960.9 million). 

The ruling comes after Cineworld backed out of a CA$2.8-billion acquisition of Cineplex in 2020.

Cineworld is one of the largest movie theaters in the world, with over 787 theaters and 9,500 screens worldwide.

An acquisition of Regal in 2017 for $3.6 billion made Cineworld one of the largest operators of movie theaters in North America. Regal has 517 movie theaters and 6,885 screens across 42 states.

Larger rival AMC Entertainment Holdings AMC has 950 theaters and over 10,500 screens worldwide, making it the market leader. The company has 593 locations in the U.S.

AMC CEO Adam Aron shared his thoughts on the ruling on Twitter Wednesday morning.

“A Canadian court just ruled that Regal/Cineworld, our largest competitor in the U.S./Europe must pay nearly $1 billion USD in damages over the failed Cineplex merger. Will be appealed, but anything distracting or destabilizing our biggest competitor brings opportunity to AMC,” Aron tweeted.

Related Link: 5 Things You Might Not Know About AMC CEO Adam Aron

Why It’s Important: Aron’s comments on Twitter could suggest that the fine Cineworld will have to pay out could affect the company’s financial performance and ability to compete with AMC.

“It is important that those who care about AMC see and reflect on this consequential news that came yesterday from Canada. Potentially creates significant opportunity in many ways for AMC,” Aron said in a follow-up tweet.

Earlier this year, AMC raised hundreds of millions of dollars. The move was done to help improve the balance sheet of the movie theater company, but it also was suggested that it could be used for future deals.

“Proceeds to be used primarily for acquisition opportunities and investments in existing AMC theatres aimed at growing AMC revenues, as well as for deleveraging purposes,” AMC said in a June press release. 

With AMC armed with cash and ready to make deals, the comments from Aron could suggest that AMC is looking to acquire theaters from Cineplex now that it has completed its litigation against Cineworld.

Given the struggles of global movie theatre operators during the COVID-19 pandemic, a cash-strapped Cineworld could be seen as a company looking to offload theatres to help improve its balance sheet and pay the large fine announced Wednesday.

While there is the possibility of an appeal by Cineworld in the next 30 days, Wednesday’s ruling signals that fault was found in calling off the merger.

AMC appears ready to swoop in and land cheap assets whenever they are available.

AMC Price Action: AMC shares were down 6.16% at $22.99 Wednesday morning. 

Photo courtesy of AMC.