With Imax up for sale with early talks with potential suitors, financial analysts have wasted no time speculating on who the potential buyer might be. Wall Street’s list, at the moment, is long. They span from traditional exhibitors (maybe), to private equity firms (they could be in attendance) and tech giants (this would be a rounding error for them) along with a couple of major entertainment conglomerates.
Imax is performing well as an independent large-scale cinema company, said David Joyce of Seaport Research Partners. But if the company is for sale, Joyce in a May 22 note pointed to Cinemark or AMC Theaters as logical acquirers, adding, “We really hope it will be an all-cash deal for investors since most potential strategic investors will have a conflict of interest that could derail the course of the business.”
Long-term Imax investors are no strangers to talk of potential sales around the film technologies company, as the Toronto-based company, led by CEO Richard Gelfond since 1994, has over the years searched the market for a potential sale or merger, only to pry itself off the auction block with suitable bids not materializing.
Imax now appears to be going through potential sales again as major Hollywood studios double down on theatrical releases with longer windows and premium screen experiences post-pandemic.
So Wedbush analyst Alicia Reese, in her own investment note on Friday, pointed to Apple or Sony Corp. Or Netflix or private equity firms as the most likely buyers to allow Imax to remain neutral about tentpoles landing in its theaters as major studios compete fiercely for premium big-screen slots. “PE ownership avoids the platform conflict issue altogether, as it would have no competing interest. Netflix’s content calendar remains thin enough that an Imax purchase would not prevent competing studios from accessing the format,” Reiss said.
She added that buying Imax would be a “rounding error against Apple’s balance sheet” and a useful platform for prestige Apple TV+ content. Other analysts also emphasized tension over whether studio buyers might hurt Imax’s neutral movie release model by favoring their own tentpole releases and eroding the platform’s value to competitors.
At the same time, Benchmark Equity Research analyst Mike Hickey said Imax is a unique platform for releasing premium films that stands apart from traditional exhibitors, allowing the pool of potential buyers to expand. “We believe the universe of potential buyers is unusually broad because IMAX operates less like a traditional theater chain and more like a premium entertainment technology platform,” Hickey wrote.
Logical competitors include Sony, Apple, Amazon, Disney, Comcast/NBCUniversal, and Sphere Entertainment, given their focus on immersive entertainment experiences. Other potential buyers include sovereign wealth funds internationally, “given the growing appetite for globally recognized premium entertainment infrastructure assets,” Hickey added.
A beneficial acquisition for Imax depends on the buyer and the integration that follows, Eric Wold, an analyst with Texas Capital Securities, said in a May 21 note to investors. “We continue to believe it will be difficult for any of the major Hollywood studios or local exhibitors to successfully integrate Imax without negatively impacting their upcoming film slate or network stability,” he wrote.
Imax’s global reach and increased access to local language and alternative film programming “opens the door to other potential buyers that won’t necessarily impact Hollywood streaming,” Wold added.
For Steve Frankel, a digital media analyst at Rosenblatt, investor value in IMAX would be better preserved if it remained a standalone company, even if management appears to be looking for a potential buyer while things are going well.
“We remain believers in the IMAX story. The combination of the ongoing consumer shift to premium viewing experiences, the company’s growing influence with major filmmakers and a film slate that has diversified beyond Hollywood to include local language and alternative content, sets the stage for strong box office growth and margin expansion,” Frankel wrote in a note to investors issued Friday.
