March 13, 2015 / 1:42 PM / 5 years ago

Exclusive - Carmike Cinemas explores sale: sources

(Reuters) - Carmike Cinemas Inc CKEC.O, the fourth-largest U.S. movie theatre chain, has hired investment bank JPMorgan Chase & Co (JPM.N) to help it explore strategic alternatives, including a potential sale, according to people familiar with the matter.

Carmike has approached some of its competitors in recent months in the United States and abroad to discuss a potential deal, the people said. There is no certainty that this process will result in a sale of the company, the people added.

Carmike shares jumped as much as 12.5 percent on the news and were trading up 11 percent at $34.45 in early afternoon trading in New York on Friday. At the day’s highs, the stock reached its highest level since August.

The sources asked not to be identified because the sale process is confidential.

“The company has stated that its policy is not to comment on unusual market activity or rumours,” Carmike said in a press release following the Reuters report. JPMorgan did not immediately respond to a request for comment.

Columbus, Georgia-based Carmike has a market capitalisation of around $830 million (562.59 million pounds) and competes with Cinemark Holdings Inc (CNK.N) and Regal Entertainment RGC.N, as well as AMC Entertainment Inc, which was acquired by China’s Wanda Group in 2012 for $2.6 billion.

Movie theatres face increasing competition from a range of digital entertainment options, such as from Netflix Inc (NFLX.O) and Apple Inc (AAPL.O). Attendance has fallen in the United States and Canada over the past decade as a result.

Regal Entertainment last year had hired a bank to explore its options but said in January it had shelved those plans. Sources said at the time this was due to the lack of strong buyer interest.

While theatre attendance has been declining, Carmike has been pursuing growth by expanding into new areas, such as alcohol sales and dining in about 30 theatres.

Any merger of Carmike with a large competitor could be closely looked at by regulators, who have scrutinized the fairly consolidated cinema industry vigorously in recent years.

Last November, the Justice Department sued to block the merger of Screenvision and National CineMedia Inc (NCMI.O), the two largest suppliers of commercials in movie theatres. Carmike owns a stake in Screenvision, while the other large theatre operators own stakes in National CineMedia.

Carmike had 278 theatres in 41 states as of the end of September, with more than 20 theatres each in Georgia, Tennessee, Alabama, Florida, North Carolina and Pennsylvania, according to its website.

The company generated $689.9 million in operating revenue last year, up from $634.8 million a year ago. It had $352 million in net debt as of the end of December.

Reporting by Liana B. Baker in New York; Editing by Nick Zieminski

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