Carmike Cinemas Pays $36 Million For Robert Redford's Sundance Cinemas

By Trey WilliamsMarketWatch Pulse

Carmike Cinemas Inc. shares were up more than 5% in early Wednesday trade, after it said late Tuesday it acquired actor Robert Redford's Sundance Cinemas for $36 million. The deal adds five theaters and 37 screens to Carmike's U.S. operations, according to a news release. The company now has 274 theaters and 2,900 screens in 41 states. B. Riley & Co. analyst Eric Wold said the acquisition should bring stronger producing assets at an attractive multiple to the Carmike circuit. "We believe this transaction clearly demonstrates management's ability to find high-quality assets--Sundance generates 3x the cash flow per screen of [Carmike]--for an attractive valuation," Wold wrote in a note. Wold noted that this is Cirmike's first acquisition since May 2014. Investors were getting impatient, but he said this deal should help boost their confidence as management will likely use the remaining balance sheet to drive shareholder value through selective acquisitions. In a statement, Carmike said Sundance Cinemas had net income of $2.6 million for the 12 months ending June 30, while its pro-forma earnings before interest, taxes, depreciation and amortization (EBITDA) were just under $5.6 million. Shares of Carmike are down nearly 12% in the year to date, while the S&P is down 3%.

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