CKEC Flashcards
10.6.2015 - CKEC Acquires Sundance Cinemas for $36mm in Cash
The acquisition is expected to be immediately accretive (net of one-time transaction costs), on an EPS, EBITDA, and cash flow basis and is projected to add incremental revenue of $24M and, after general and administrative synergies, pro forma EBITDA of $5.6M to Carmike’s financials for the trailing twelve month period ended 30-Jun, 2015
Shares are trading up 4.5% following last night’s announcement that Carmike Cinemas will acquire Sundance Cinemas for $36.0M in cash. The transaction adds 5 theaters and 37 screens, bringing CKEC’s footprint to 274 theaters and 2,909 screens, just shy of the company’s stated goal of 300 theaters and 3,000 screens
From a strategic perspective, analysts were positive on the acquisition and highlighted improved geographic diversity. Given most of Sundance’s properties are located in urban areas, analysts also note that the deal could help the company become less reliable on blockbusters, which tend to drive performance in CKEC’s core rural cinema base
Discussion around valuation tended to suggest that the deal was consummated at an attractive EBTIDA multiple of ~6.5x, relatively in-line with CKEC’s current trading multiples. Management expects the deal to be immediately accretive to EPS, EBITDA, and cash flow. Analysts cited potential for modest synergy generation through consolidated G&A, theater opex, and film costs
Given the company’s healthy balance sheet and a smaller, private cinema companies as potential targets, analysts believe that CEKC will continue to pursue an acquisitive M&A strategy. A quick look at sell-side sentiment shows 90% of firms keeping Buy-equivalent ratings compared to a 48% average for the S&P 500; average price target of $33 represents a 44% premium to current levels
