Jeff Bezos explores acquisition of AMC through his investment advisors
According to sources, Amazon founder Jeff Bezos has tasked his investment advisors and entertainment chiefs with exploring plans to acquire AMC Entertainment and its chain of nearly 600 movie theaters. As reported earlier, Amazon sees the movie theaters as “marketing weigh stations” that could be used to promote Amazon Prime movies and cross-sell other Amazon services through the distribution hubs. This move comes after several big theater chains, including AMC, have struggled financially due to the pandemic restrictions that have limited in-person audiences.
AMC’s potential strategic value for Amazon
Although some may question Amazon’s move into a declining industry like movie theaters, there could be strategic value in acquiring AMC. By adding the brick-and-mortar locations to its distribution network, Amazon can use them as local distribution hubs and collect data on viewing preferences of theatergoers. Furthermore, AMC theaters could potentially serve as a platform for the 12 to 15 movies Amazon plans to release in cinemas annually.
The acquisition discussions are fluid
The acquisition discussions are fluid, and it’s unclear whether Amazon will make an offer to buy. However, AMC’s stock surged over 13% in trading following the news, closing at $5.15 per share with a market cap of about $2.67 billion.
Challenges with acquiring a company like AMC
Acquiring a brick-and-mortar business like AMC would be out of character for Amazon. However, the company spent nearly $14 billion to take over Whole Foods in 2017 and has shown interest in entertainment properties. While acquiring a company like AMC may seem unlikely due to its more than $5 billion in debt on its balance sheet, Amazon has never been afraid to experiment and may wait for the stock price to fall further or buy the theater’s assets out of bankruptcy.
Analysts’ views on the acquisition
Wedbush Securities analyst suggests that Amazon would be better off buying a piece of Cineworld instead of acquiring AMC due to the latter’s massive debt and inflated valuation. Another major theater operator, Cineworld Group Plc, is expected to emerge from bankruptcy in June. However, it remains to be seen whether Amazon will take this suggestion into consideration or pursue the acquisition of AMC instead.
Amazon’s interest in entertainment properties
Jeff Bezos has long seen video entertainment as a priority for the company, believing Prime Video encourages customers to spend more on Amazon. Therefore, an acquisition of a company like AMC would allow Amazon to delve deeper into the entertainment industry.
No official comments from Amazon and AMC yet
Both Amazon and AMC have not yet issued any comments regarding the possible acquisition. It remains to be seen whether this potential acquisition will come to fruition or whether it is just another experiment being considered by Jeff Bezos and his team.
In conclusion, the potential acquisition of AMC by Amazon is significant news that could reshape both industries. While it is uncertain whether this move will become a reality, its implications are far-reaching for both companies and their competitors.
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