Silver Lake Invests $600 Million in AMC With Wanda Retreating

(Bloomberg) -- Dalian Wanda Group Co., the Chinese firm controlled by Wang Jianlin, is scaling back its bet on AMC Entertainment Holdings Inc. as part of a push by the billionaire to shore up finances.

The largest U.S. movie-theater chain will receive a $600 million investment from private equity firm Silver Lake, letting it buy back stock owned by Wanda and pay a dividend. Investors initially cheered the move, sending the shares up as much as 6 percent on Friday, though the rally evaporated amid concerns about AMC’s growing debt load.

Wanda struck a $2.6 billion deal for AMC in 2012, part of an expansion into entertainment. Since then, the conglomerate has been forced to lower its ambitions. Chinese authorities have begun scrutinizing capital outflows, and Wanda’s debt mounted. As part of the pullback, the company sold off theme parks and hotel assets last year.

Silver Lake Invests $600 Million in AMC With Wanda Retreating

Under the terms of Friday’s agreement, Silver Lake will buy $600 million of AMC convertible notes. The theater chain is using about $421 million of the funds to repurchase roughly 32 percent of Wanda’s Class B shares.

On Sept. 28, AMC also will pay a special dividend to $1.55 a share to all Class A and Class B shareholders -- though it won’t apply to the Wanda shares being repurchased.

Silver Lake will name an AMC board member as part of the pact. AMC, based in Leawood, Kansas, also will add another independent director who has “significant technology experience and knowledge, with support from Silver Lake,” according to Friday’s statement.

Tech Know-How

“We expect that Silver Lake will add significant value to AMC as it comes into our boardroom, given its longstanding experience and savvy in the technology and media sectors,” AMC Chief Executive Officer Adam Aron said.

Menlo Park, California-based Silver Lake has $42.5 billion in assets under management and committed capital. The firm closed its fifth buyout fund last year, collecting $15 billion -- the largest technology-focused pool managed by a private equity firm, according to data compiled by Bloomberg. Silver Lake owns stakes in companies including Dell Inc., Tesla Inc. and Alibaba Group Holding Ltd.

After rising as high as $21.30 on Friday, AMC shares retreated. As of 2:51 p.m. in New York, they were down 0.5 percent at $20. They had been up 33 percent this year through Thursday’s close.

AMC was downgraded to neutral from buy at MKM Partners in the wake of the Silver Lake deal.

During a call with analysts, AMC was questioned about its decision to return money to investors -- rather than paying down debt.

‘Non-Disturbing’

“We wanted our shareholder base to be as excited about as we are because we think it’s potentially so transformational for AMC to bring Silver Lake into the boardroom and to effect an orderly transfer of some Wanda shares in a non-disturbing way,” Aron said. “We still are committed to deleveraging.”

Aron said the company expects to make progress in reducing debt over the next 36 months. AMC added that it started conversations with rating agencies because the bonds will be classified as debt on the balance sheet. But it doesn’t know if the issue would result in a ratings downgrade.

Goldman Sachs Group Inc. advised AMC on the deal, while Weil, Gotshal & Manges LLP served as legal counsel. Moelis & Co. and Skadden, Arps, Slate, Meagher & Flom LLP, meanwhile, worked with AMC’s board. Simpson Thacher & Bartlett LLP advised Silver Lake.

AMC has more than 1,000 theaters around the world, with almost 11,000 screens.

©2018 Bloomberg L.P.