AMC lying in wait
Delays $60 mil stock offering due to market slump
Money managers speculate AMC chairman/CEO Stan Durwood wants to wait until the end of July in the hope that box office business will pick up enough for exhibs to show some profit growth, reversing the trend of the past few months.
But uncertainty about the offering sparked a flurry of rumors late last week that Durwood was planning to sell AMC. While people close to the company discount the speculation, it prompted a sharp rise in AMC's stock price late last week, closing Thursday up $1.31 to $19.68.
AMC co-chairman Peter Brown refused to comment about the status of the offering Thursday, citing securities law restrictions. But Wall Street sources say the firms underwriting the offering have not scheduled a roadshow to market the deal, a sign that the offering has no set timing.
AMC filed a prospectus for the offering in late May, revealing that 3.3 million shares now owned by the Durwood family would be sold to the public.
Wall Street sources said AMC initially planned to start marketing the deal June 22 and to have it completed by July 4. But as of Thursday no roadshow was scheduled, although people close to the deal said it was now being seen as a "late-July" offering.
Durwood can't delay the offering much past the end of July, as he has to complete it by Aug. 15 to comply with the terms of settlement of a shareholder lawsuit. The offering was a condition both of the settlement of the lawsuit and a restructuring of the Durwood family's interest in AMC.
Durwood and each of the children will sell some stock, although Durwood is retaining enough supervoting stock to keep control of the exhib.
But the situation is complicated by a clause in the family agreement requiring Durwood to compensate his children if the stock offering is priced below $18 a share. AMC stock has been trading below $18 for much of the time since the prospectus was filed.
Sources say the offering's delay is unrelated to any problems with the SEC, and most believe the low stock price is the main factor. Additionally, AMC wants to avoid clashing with marketing of a 10 million share offering planned by Loews Cineplex Entertainment Inc., likely to raise about $120 million, sources said.
Gregg Hymowitz, principal with money managers Entrust Capital, said Durwood may be hoping that an improvement in the box office in July could help lift AMC's stock price above $18.
But investors' expectations of the offering is probably one of the factors dampening the price, Wall Streeters said, as the upcoming sale of a lot of stock acts as an "overhang" on the market. And Hymowitz said last week's price rise would probably reverse once rumors of a sale of AMC dissipated.
Whether box office will pick up enough in the next few weeks to help the exhibs is not clear. Box office grosses have been strong so far this year but exhib profits have been eroding, apparently because the rescreening of circuits is increasing competition faced by exhibs.
In any case, Wall Streeters say AMC needs to schedule the roadshow this week to ensure it occurs in time for a late-July pricing.
Otherwise the offering moves into early August, which creates more problems. Cowen & Co. analyst Paul Marsh said "if they don't get it done by July 31, you are not getting it done (because) you don't market a deal in August" when institutional investors take vacation.
