AMC Theatres has settled a shareholder lawsuit that threatened a planned reverse stock split arising from a conversion of AMC Preferred Equity Units, or APEs, into common stock.
AMC Entertainment Holdings, parent of the mega-exhibitor and led by CEO Adam Aron, in an SEC filing said it entered into an April 2 settlement agreement that will see holders of AMC common stock receive one share of equity for every 7.5 shares held following a planned 10-for-1 split.
The settlement of the AMC Entertainment Holdings Inc. Stockholder Litigation case in a Delaware Chancellery Court is valued at over $100 million, based on recent trading prices of AMC equity, according to lawyers representing the shareholders suit.
“The settlement provides investors with additional shares in satisfaction of their voting rights claims, while allowing the company to move forward with its plan to pay down its debt. Common stockholders will have a greater stake in AMC as it continues on its path to recovery,” stockholders jointly represented by law firms Bernstein Litowitz, Grant & Eisenhofer, Fields Kupka & Shukurov, and Saxena White said in a statement.
The shareholders litigation sought to block a plan by AMC’s board of directors to increase the number of authorized shares without compensating existing common stockholders. On March 14, shareholders voted to allow the parent of AMC Theatres to convert APE units into the company’s common shares.
News of the suit settlement sent shares in AMC Theatres diving $1.07, or 21 percent, to $4.04 in after-hours trading, while the value of APE units soared by 27 cents, or just over 18 percent, to $1.75.
AMC Theatres also got the go-ahead from investors for a reverse stock split to help the mega exhibitor continue selling stock, instead of APE units, to reduce its high debt load. The conversion of APE units as approved by investors could be delayed with a possible Delaware Chancery Court injunction hearing planned for April 27.
The Delaware Court allowed the March 14 vote on the APE preferred units conversion to go ahead, but the planned court hearing in April could delay any new debt-raising action by AMC following the shareholder vote.
