A report that the world’s biggest retailer is looking to buy the largest theater chain has been met with skepticism by some financial analysts who say a deal between the companies is unlikely.
Amazon founder Jeff Bezos directed the company's investment advisers to explore a plan to buy AMC Theatres, which has struggled financially as consumers have returned slowly to theaters during the pandemic, according to a report this week by The Intersect blog that cited sources familiar with the discussions.
The Seattle-based company could use AMC and its nearly 1,000 locations across the globe as a platform to promote Amazon Prime movies with award potential, according to the report, while gaining data on AMC’s annual 200 million moviegoing customers to allow the retailer to cross-sell services such as grocery delivery.
However, a pair of Wedbush Securities equity analysts said in a note to clients that the acquisition by Amazon of AMC is "extremely unlikely" given the chain’s $4.6 billion in debt. “The bottom line is that Amazon has no interest in being in the theatrical exhibition space to make money,” Wedbush analysts Alicia Reese and Michael Pachter wrote Tuesday.
If Amazon is interested in buying movie theaters to put Prime productions in contention for Hollywood awards, it would be better off buying part of Cineworld, the world's second-largest theater chain and parent of Regal Cinemas, which filed for bankruptcy in September, Reese and Pachter wrote. Cineworld is expected to submit a bankruptcy exit plan on the heels of reaching a deal with its creditors to trim billions of dollars of debt from its balance sheet.
AMC’s share price increased 13% on Tuesday on the report, but fell the following day and was down almost 3% by Wednesday night.
An acquisition of the distressed chain’s theaters doesn’t seem to square with Amazon’s current focus on expanding its AWS cloud platform, or the company's slowing expansion of its logistics, office and retail real estate footprint over the past year, Dan Morgan, an analyst with Atlanta-based Synovus Trust Co. that tracks Amazon and other tech companies, told CoStar News.
“An AMC Theatres purchase would add a lot of unprofitable real estate,” Morgan said in an email.
Asked to comment, representatives for Amazon and AMC told CoStar News in separate emails that their companies don’t respond to “rumors or speculation.”
However, it wouldn't be the first time that Amazon has explored operating physical movie theaters. The company that has become a big name in streaming entertainment last year leased a shuttered ArcLight movie theater in Culver City, California, in another sign of how relatively new media players are affecting commercial real estate.