November 8, 2004
VIA FAX AND OVERNIGHT MAIL
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Mail Stop 03-05
Washington, D.C. 20549-0303
Attention: Ms. Abby Adams
Dear Ms. Adams:
On behalf of AMC Entertainment Inc. (the "Company"), we are delivering herewith for filing pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a Revised Preliminary Proxy Statement (the "Revised Proxy Statement") on Schedule 14A and pursuant to Rule 13e-3 of the Exchange Act an Amendment No. 2 ("Amendment No. 2") to the above-referenced Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3"). For your convenience, we are also providing you with courtesy copies of the Revised Proxy Statement and Amendment No. 2 marked to show all changes made since their filing with the Commission on October 22, 2004.
The Revised Proxy Statement and Amendment No. 2 contain the responses of the Company to the Staff's comments on the above-referenced Proxy Statement and the Schedule 13E-3 as contained in the Staff's letter dated November 3, 2004 (the "Comment Letter"). The comments of the Staff are set forth in their entirety in bold text below, and responses to such comments are set forth in plain text immediately beneath each comment.
In response to the Staff's comment, the Company has revised the Schedule 13E-3 to add Messrs. Brown and Singleton as filing persons, and has revised the disclosure in the Revised Proxy Statement accordingly.
With respect to other members of AMCE management who may obtain equity interests in the surviving entity, the Company respectfully submits to the Staff that these individuals are not affiliates engaged in the going-private transaction.
In addition to Messrs. Brown and Singleton, six members of the Company's senior management will be given the opportunity to acquire equity interests in Holdings, or be granted options for equity interests pursuant to the new management stock option program described on page 98 of the Revised Proxy Statement. It is the Company's view that none of these individuals are "affiliates" of AMCE within the meaning of Rule 13e-3(a)(1),i.e., none of these individuals
control, directly or indirectly, AMCE. None of these individuals currently serve on AMCE's Board of Directors or will serve on the board of directors of AMCE or Holdings following the merger.
Nevertheless, even if the Staff believes that such members of senior management are affiliates of AMCE, the Company respectfully submits that such individuals are not engaged in the transaction. A number of factors support the Company's conclusion in this matter.
Equity Ownership. As the Staff has noted in its Current Issues Outline, an important factor for consideration in determining whether members of management are engaged in a going private transaction is whether such members of management will ultimately hold a material amount of the surviving company's outstanding equity securities.
As disclosed in the Revised Proxy Statement, members of AMCE's senior management will be given the opportunity to roll over or invest1/3 or more of the net after-tax value of their current AMCE equity holdings in Holdings. In addition, equity awards representing up to 6% of the equity in Holdings will be available under an option plan (such options will vest over a five year period from the date of grant); of the 6% available under the plan, awards representing an aggregate of only 2% of the equity of Holdings have been designated for grant to the six individuals in question.
As illustrated in the table set forth onAttachment Ato this letter, the six individuals in question possess a very small equity interest in AMCE before the transaction and will own a very small equity interest in Holdings following the transaction, even assuming (i) full reinvestment by such individuals of the value of their current AMCE equity (which the Company has been informed is highly unlikely) and (ii) full vesting of the equity-based awards under the new option plan (which such awards, as indicated above, will vest over a five year period from the date of grant).
The Company has advised us that each of these individuals has informed the Company that no definitive decision as to whether to make an investment in Holdings, nor any decision as to the size of any such investment, has been made at this time.
No Board Membership. None of the individuals in question will serve on the Board of AMCE or Holdings following the merger.
No Voting of Shares. It is anticipated that members of AMCE management who elect to invest in Holdings and receive equity interests in Holdings will be required to become parties to a stockholders agreement pursuant to which such individuals will agree to vote their shares as directed by the JPMP Investors and the Apollo Investors. Further, the stockholders agreement will contain restrictions on transfer of any shares in Holdings as well as "drag along" rights, pursuant to which the JPMP Investors and the Apollo Investors could compel a sale of such shares in connection with a sale of Holdings to another party. These provisions underscore the Company's belief that none of these members of management, even if they obtain equity in Holdings through the option plan, would in any capacity "control" Holdings.
No Active Participation in Pursuit of Transaction. The Company further respectfully notes to the Staff that the members of AMCE's senior management in question were not the driving force behind the pursuit of the transaction; as disclosed in the proxy statement under the caption "Background of the Transaction," the AMCE Board had long been engaged in pursuit of a transaction that would deliver value to the Company's stockholders. Further, as none of the individuals were members of AMCE's Board, they were not actively involved in the deliberation of the transaction.
Employment Arrangements. Finally, it is noted that the transaction is not conditioned on the members of management in question entering into new employment agreements, nor was the
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continued employment of any such members of management discussed with such individuals prior to announcement of the transaction. None of the six individuals in question will be entering into new employment agreement in connection with the transaction. At this time, the employment agreements for Messrs. Brown and Singleton are being revised to reflect the new, post-transaction ownership structure.
For the foregoing reasons, the Company respectfully submits that the members of AMCE's senior management who may invest in Holdings immediately prior to or upon consummation of the transaction are not affiliates engaged in a going private transaction. Accordingly, such individuals have not been added as filing persons to the Schedule 13E-3.
The Company has been informed that the syndications will occur immediately prior to completion of the merger, and has revised the document accordingly. In response to the Staff's comment, the Company has further revised the disclosure on pages 32, 100 and 105 to include dollar limitations discussed in its previous response.
In response to the Staff's comment, the Company has revised the disclosure on page 88 of the Revised Proxy Statement to summarize the differences between Goldman Sachs' May 25, 2004 presentation and its July 19, 2004 presentation.
In addition, the Company has added additional disclosure with respect to Lazard's break-up fee analysis on page 47 of the Revised Proxy Statement. Finally, the Company has provided additional disclosure with respect to the Lazard presentations to the Independent Committee on page 36 of the Revised Proxy Statement, and has filed such materials as Exhibits (c)(8), (c)(9), (c)(10) and (c)(11) to Amendment No. 2. Additional materials furnished to the independent committee have also been filed as Exhibits (c)(12) and (c)(13).
The Company has revised the disclosure on page 33 of the Revised Proxy Statement in response to the Staff's comment to provide information with respect to the filing persons Messrs. Brown and Singleton. With respect to other members of AMCE management who may acquire equity interests in Holdings on or prior to consummation of the merger, we respectfully direct the Staff to our response to comment #1 above, and the Company's analysis with respect to such other individuals not being affiliates engaged in the going private transaction (and therefore not filing persons).
The Company has revised the disclosure on page 37 of the Revised Proxy Statement in response to the Staff's comment.
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We supplementally advise the Staff that Mr. Vardeman joined the predecessor law firm to Polsinelli Shalton Welte Suelthaus PC ("Polsinelli") as a shareholder in June 1983. He resigned from the firm in January 1998. Mr. Vardeman has been a member of the Company Board since 1983, during which time he has received director fees in accordance with the Company's director compensation policies in effect from time to time. During the first few years in which Mr. Vardeman was both a member of the Company Board and a shareholder of Polsinelli, he remitted the director fees he received from the Company to Polsinelli in accordance with Polsinelli policy. After Polsinelli modified its policy regarding director fees approximately 18 years ago, Mr. Vardeman retained his director fees and did not remit them to Polsinelli. Since January 1998, Mr. Vardeman has not been associated with Polsinelli and since that time he has not received any compensation from Polsinelli other than deferred compensation and severance payments (in accordance with Polsinelli's shareholders agreement in effect at the time of Mr. Vardeman's retirement from the firm), all of which have been paid in full. Polsinelli does not presently compensate Mr. Vardeman in any manner. Mr. Vardeman has not been and will not be compensated by Polsinelli in connection with the Independent Committee's engagement of Polsinelli with respect to the merger. Polsinelli performed specific legal assignments on behalf of certain affiliates of the Company during the period from 1986 until 2001 related to the proposed development of the Power & Light district in downtown Kansas City, Missouri. Other than the compensation for those specific assignments, the limited amount of director fees remitted to Polsinelli by Mr. Vardeman and compensation for Polsinelli's work on behalf of the Independent Committee and the other independent committees of the Company Board described in the Revised Proxy Statement, Polsinelli has not received any compensation from the Company or its affiliates, and no future relationship between Polsinelli and the Company or its affiliates is currently contemplated. The Independent Committee believed that Polsinelli was sufficiently independent of the Company, its management and major stockholders to fairly and effectively represent the interests of the Independent Committee.
The Company has revised the disclosure on page 48 of the Revised Proxy Statement in response to the Staff's comment.
The Company has revised the disclosure on pages 52-62 of the Revised Proxy Statement in response to the Staff's comment.
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The Company has revised the disclosure on pages 52-73 of the Revised Proxy Statement in response to the Staff's comment.
The Company also supplementally advises the Staff that certain of the above factors were not relevant to the determinations by some of the filing persons. For example, the relationships of Goldman Sachs were not relevant to the consideration of the Apollo Investors, the JPMP Investors, Marquee and Holdings as such parties did not rely on the opinion of Goldman Sachs in making their determination as to fairness.
The premiums paid analysis performed by Lazard was not available to, and therefore not considered by or relevant to the analysis of, the Board, the Apollo Investors, the JPMP Investors, Marquee, Holdings and the Management Investors.
The Company has revised the disclosure on page 53 of the Revised Proxy Statement in response to the Staff's comment and to clarify that the Durwood Voting Trust is the sole holder of shares of Class B stock. We respectfully direct the staff to page 46 of the Revised Proxy Statement where it is indicated that Hughes Hubbard & Reed LLP served as legal counsel to the Durwood Voting Trust.
The Company has provided additional disclosure on page 61 of the Revised Proxy Statement in response to the Staff's comment.
The Company has revised the disclosure on pages 62-73 of the Revised Proxy Statement in response to the Staff's comment.
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another, such as the board, independent committee, or the financial advisor, it must expressly adopt the analyses of the party that performed the Item 1014 analysis in order to fulfill its disclosure obligation. It appears that Apollo, JPMP and Marquee are relying on the analysis of the board and/or special committee. For example, on page 62, Apollo cites the board's belief regarding the need for an unaffiliated representative. The determination should address Apollo's beliefs or adopt the board's analysis regarding procedural fairness. Please note that a filing person cannot insulate itself from liability by relying upon another's analysis that does not comply with the specific disclosure requirements of Schedule 13E-3. Revise each fairness determination accordingly.
The Company has revised the disclosure on pages 64-73 of the Revised Proxy Statement in response to the Staff's comment.
With respect to the precedent transactions analysis performed by Lazard, the Company has revised the disclosure on pages 77 and 78 of the Revised Proxy Statement in response to the Staff's comment.
With respect to the comparable companies analysis performed by Lazard, the Company respectfully submits that the disclosure on pages 75 and 76 of the proxy statement was previously revised to disclose the criteria used by Lazard to select the comparable companies used in such analysis. With respect to the comparison of selected theatre exhibitors and selected transaction analyses performed by Goldman Sachs, the Company has revised the disclosure on pages 84-86 of the Revised Proxy Statement in response to the Staff's comment.
By way of clarification, we respectfully note to the Staff that the fairness opinions delivered by each of Goldman Sachs and Lazard relate solely to stockholders who satisfy the definition of "unaffiliated stockholders" under Rule 13e-3(a)(4); however, both such opinions exclude (i) the holder of the Company's Class B stock, the Durwood Trust and (ii) members of Company management who may invest in Holdings but are not filing persons, all of whom (other than Messrs. Brown and Singleton) we believe would also qualify as "unaffiliated stockholders" under Rule 13e-3(a)(4). The reference to the financial advisors' respective intentions refers solely to the fact that each sought to provide a fairness opinion to each of the Company's "unaffiliated stockholders" (although ultimately each excluded the Durwood Trust and certain members of Company management) from the ambit of their opinion.
We have clarified the disclosure on pages 52, 53 and 57 of the Revised Proxy Statement to clarify that each of the Company Board and the Independent Committee was aware of the fact that the opinions of Goldman Sachs and Lazard, respectively, did not address the fairness of the transaction to the Durwood Trust and members of Company management who are not filing persons but may invest in Holdings, but each of the Company Board and the Independent Committee concluded nevertheless that the transaction was fair to the unaffiliated stockholders as a whole.
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The Company respectfully submits that it has appropriately summarized the analyses that Goldman Sachs customarily performs and provided to the Board of Directors of AMCE. After consultation with Goldman Sachs, the Company respectfully submits that disclosure of the fact that Goldman Sachs has not calculated a range of implied values for the comparable companies and selected transactions analyses should not be required when, in the opinion of Goldman Sachs, any such calculation would not be meaningful and would be an oversimplification of a nuanced and complex analysis. However, to provide additional insight into what Goldman Sachs believes are the appropriate reference points, we are supplementing the disclosure as described below.
With respect to the selected transactions analysis, Goldman Sachs is of the view that the two most appropriate reference points, which are included in the "Transactions Since 2000" and are already referred to under "Special Factors—Background of the Merger" in the description of Goldman Sachs' discussions with AMCE's Board of Directors on June 21, 2004, are the acquisitions of Loews Cineplex and Cinemark in 2004. These two recently completed transactions are the two largest acquisitions in the theatre exhibition industry in that period and, in the view of Goldman Sachs, the most relevant. Accordingly, we have included additional disclosure with respect to these transactions in the selected transaction analysis section which we believe provides a clear basis for comparison of the merger to the two most relevant of the selected transactions.
With respect to the comparable companies analysis, the table included in the description of this analysis indicates that, as a multiple of enterprise value to LTM EBITDA at March 31, 2004, the Company's multiple is 6.2x in comparison to multiples of 7.2x and 8.4x for Carmike Cinemas Inc. and Regal Entertainment Group, respectively. We respectfully submit that these varying multiples are merely reflections of how the public markets value these different companies and is not suggestive of a meaningful range of value for the merger. Accordingly, we propose not to make any additional disclosure.
In addition, the Company has revised the discounted cash flow analysis and leveraged buyout analysis to clarify that forecasted financial information used by Goldman Sachs was based on AMCE management's projections.
The Company has revised the disclosure on pages 89 and 90 of the Revised Proxy Statement in response to the Staff's comments.
The Company has revised the disclosure on pages 91-95 of the Revised Proxy Statement in response to the Staff's comment. The Company again confirms for the Staff that all material non-public information that formed the basis for the fairness analyses has been disclosed in the filing.
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inaccurate or the assumptions and estimates are no longer valid, then revise to disclose these facts and explain why this information should not be relied upon.
The Company has revised the disclosure on page 95 of the Revised Proxy Statement in response to the Staff's comment.
The Company respectfully submits that the management stock option plan contemplates equity-based awards representing 6% of the fully-diluted common stock of Holdings as of consummation of the merger. However, the allocation of awards representing only 5% of the fully-diluted equity of Holdings has been determined at this time. As indicated immediately below the table contained in our response to prior comment 1, awards representing 1% of the fully-diluted common stock of Holdings have been reserved for future grant to individuals yet to be determined (e.g., future hires, new participants in the plan, or supplemental awards). Accordingly, the analysis contained in our previous response was based on the assumption that the identifiable individuals (i.e., current members of AMCE senior management) would receive equity awards representing only 5% of the 6% available for grant.
The Company has revised the disclosure on page 107 of the Revised Proxy Statement in response to the Staff's comment.
The Company has further revised the disclosure on pages 114 and 115 of the Revised Proxy Statement to clarify the material tax consequences of the transaction to the Company, its affiliates, and unaffiliated security holders. In response to the Staff's comment, the Company has also removed the qualifying words (such as "should" and "generally") contained in the document.
* * * * * *
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We appreciate the Staff's attention to this matter. Should you have any questions, or wish to discuss any of the responses set forth above or in the Revised Proxy Statement, please do not hesitate to contact Eileen Nugent at (212) 735-3176, Howard Ellin at (212) 735-2438, Gregg Winiarski at (212) 735-4197 or Brandon Van Dyke at (212) 735-3743.
| Sincerely | ||
Gregg Winiarski |
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Attachment A
Management Ownership Interests Post-Transaction
| | (a) Percent of AMCE Common Stock Beneficially Owned Before Transaction | (b) Pre-Tax Value of Equity Holdings in AMCE (Stock, Options, DSU's) | (c) Estimated After-Tax Value of Equity Holdings in AMCE (after tax at 43.5%) ((b) * .565) | (d) Percent of Holdings Equity Assuming Full Reinvestment | (e) Amount of Reinvestment (assuming investment of1/3 of After-Tax Value of Equity Holdings in AMCE) ((c) * .33) | (f) Percent of Holdings Equity assuming 1/3 Reinvestment | (g) Expected Maximum Equity Available for Grant under Option Pool | (e) Maximum Potential Equity Stake in Holdings (d) + (g) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Craig Ramsey | 0.2% | $ | 859,032 | $ | 485,353 | 0.06 | % | $ | 160,167 | 0.02 | % | 0.50 | % | 0.56 | % | |||||
| Richard Walsh | 0.1% | 811,500 | 458,497 | 0.06 | % | 151,304 | 0.02 | % | 0.50 | % | 0.56 | % | ||||||||
| John McDonald | 0.3% | 761,171 | 430,062 | 0.05 | % | 141,921 | 0.02 | % | 0.25 | % | 0.30 | % | ||||||||
| Rolando Rodriguez | 0.2% | 640,404 | 361,829 | 0.05 | % | 119,403 | 0.02 | % | 0.25 | % | 0.30 | % | ||||||||
| Mark McDonald | 0.2% | 504,056 | 284,792 | 0.04 | % | 93,981 | 0.01 | % | 0.25 | % | 0.29 | % | ||||||||
| Kevin Connor | Less than 0.1% | 216,847 | 122,518 | 0.02 | % | 40,431 | 0.01 | % | 0.25 | % | 0.27 | % | ||||||||
| Total | Less than 1.1% | $ | 3,793,010 | $ | 2,143,051 | 0.28 | % | $ | 707,207 | 0.09 | % | 2.0 | % | 2.28 | % | |||||
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