Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: AMC to sell two theaters to win approval of Starplex Cinemas acquisition, (Dec 15, 2015)

By Jeffrey May, J.D.

In order to resolve the competition concerns of the U.S. Department of Justice and the State of Connecticut over a proposed $172 million acquisition of SMH Theatres Inc. (Starplex Cinemas), AMC Entertainment Holdings Inc. has agreed to divest movie theaters in Connecticut and New Jersey. A complaint was filed today in the federal district court in Washington, D.C., challenging the acquisition of the Dallas-based operator of 33 movie theaters by the country’s second-largest theater exhibitor. A proposed consent decree, which is intended to resolve the antitrust concerns raised by the deal, was also filed with the court. The court must determine whether the settlement is in the public interest following the standard Tunney Act proceedings (U.S. v. AMC Entertainment Holdings, Inc., Case No. 1:15-cv-02181).

The government alleged that the proposed transaction, as initially agreed to by AMC and Starplex Cinemas, would lessen competition substantially in two local markets for the exhibition of first-run, commercial movies. The two relevant geographic markets are: (1) the area in and around East Windsor, New Jersey; and (2) the area in and around Berlin, Connecticut.

According to the government, there are only three first-run movie theaters in the East Windsor area, which is near Princeton. One of those theaters is a Starplex Cinema, and the two others are operated by AMC.

Within the Berlin area, which is outside of Hartford, the merging parties each operate one first-run movie theater. These two theaters are located approximately eight miles apart. Three non-party theaters in this area also show first-run, commercial movies, according to the Justice Department. In addition to alleging that the combination, as originally proposed, would have driven up ticket prices, the government contended that the proposed transaction would have eliminated competition between AMC and Starplex Cinemas over the quality of the viewing experience at their theaters in the two markets.

Proposed consent decree. Under the terms of the proposed consent decree, the parties must divest the Starplex Town Center Plaza 10 in East Windsor and the Starplex Berlin 12 in Berlin. The defendants are expected to divest the properties and related assets within 30 days; however, the Justice Department may agree to extensions. The buyers must be approved by the Justice Department. The parties have agreed to maintain the commercial viability of the divestiture assets pending the sale.

Attorneys: Gregg I. Malawer and Miriam R. Vishio for U.S. Department of Justice. Michael E. Cole for State of Connecticut. Michael B. Bernstein (Arnold & Porter LLP) for AMC Entertainment Holdings, Inc. Kay Lynn Brumbaugh (Andrew Kurth LLP) for SMH Theatres Inc.

Companies: AMC Entertainment Holdings, Inc.; SMH Theatres Inc.

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