National CineMedia Inc. and Screenvision Terminate Merger Agreement
Gail Chiasson, North American Editor
After a thorough review of options, National CineMedia Inc. has agreed with SV Holdco LLC and Screenvision,LLC to terminate the Merger Agreement signed May 5, 2014, that would have combined NCM and Screenvision.
National CineMedia Inc is the managing member and owner of 45.8% of National CineMedia, LLC, the operator of the largest in-theatre digital media network in North America.
In November, 2014, the Department of Justice filed suit seeking to block the merger. NCM and Screenvision together determined that the ongoing cost and distraction of the suit to their employees, advertisers and exhibitor partners could no longer be justified and that both companies would be better served pursuing their independent businesses as standalone companies.
“NCM has created a highly effective offering in the hyper-competitive video advertising marketplace through the power of our world-class entertainment content; premium video ratings; national reach; scalable, state-of-the-art content distribution technology; and integrated digital marketing products,” said Kurt Hall, NCM’s Chairman and CEO. “While I am disappointed that our shareholders and our advertising clients and exhibitor partners will not realize the benefits of a merger with Screenvision, I remain confident in our ability to continue to innovate and build our business.”
NCM’s positive fourth quarter 2014 results were driven largely by growth in national advertising revenue and the success of its upfront strategy and the Company entered 2015 with solid momentum. NCM continues to see strong performance in its local and regional business and, at the same time, has made significant progress expanding its national client base. This success in expanding the client base combined with the successful 2014/2015 upfront campaign has resulted in current commitments that represent approximately 77% of the 2015 national advertising annual budget (versus 51% at this time in 2014 of actual 2014 results), indicating that the Company’s network is being viewed favorably as marketers evaluate the impact of the changing media landscape.
NCM expects to continue to make progress executing its long-term strategy to expand its advertising client base by delivering improvements to its premium video network and upgrades to its distribution and inventory management technology. The Company remains confident that these enhancements will allow it to further strengthen its value proposition relative to other video advertising platforms. Combined with the changes in digital technology that are impacting the effectiveness of many traditional media platforms, NCM is well positioned to continue to gain share in the video advertising marketplace.
The termination of the Merger Agreement is effective upon NCM’s payment of a $26.84 million termination payment, which the Company has agreed to make within the next 10 business days. This payment is $2 million lower than the reverse termination fee contemplated by the Merger Agreement. NCM LLC has agreed to indemnify the Company for the termination payment as well as other costs incurred in connection with the transaction. The Company and the founding member theatre circuits each will bear a pro rata portion of this fee based on their aggregate ownership percentages in NCM LLC. The total after tax cash cost for NCM, Inc. related to the proposed merger with Screenvision including the termination fee and all legal and other expenses is projected to be approximately $11 million.
Further, certain amendments to NCM LLC’s senior secured credit facility that would have become effective upon a contribution of Screenvision to NCM LLC will be immediately and automatically revoked upon the termination of the Merger Agreement.
NCM also reaffirmed yesterday (March 16/15) its first quarter and full year 2015 outlook. For the first quarter 2015, the Company continues to expect:
- Total revenue to be in the range of $75.0 million to $78.0 million, up 7% to 11% year-over-year;
and
For the full year 2015, based on the Company’s visibility and current forecast, the company continues to expect:
- Total revenue to be in the range of $422.0 million to $432.0 million, up 7% to 10% year-over-year.
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