How a Merger Led to 45 Percent Growth and $175 Million Sale in Less Than Three YearsStarplex Cinemas

In early 2012, Starplex Cinemas, an independent movie exhibitor, was on a path to success. Since its inception in December 2004, the company had grown from a small circuit of first run and discount theatres into a company with 22 theatres and over 230 screens throughout the United States. However, the company lacked an equity partner to support the management team in more aggressively expanding Starplex into a top national chain.

At the same time, Trinity Hunt Partners, a leading Dallas-based private equity firm, was the majority owner of ShowPlex Cinemas, another independent movie exhibitor with 10 theatres and over 90 screens in Arkansas, Kansas, Oklahoma, Missouri and Nebraska. Trinity Hunt desired to scale the ShowPlex platform with additional theatres and a broader footprint. After meeting with the Starplex management team, both parties realized the significant value a partnership would bring as the companies operated complementary theatre locations with limited geographic overlap.

In December 2012, Trinity Hunt completed the merger of former portfolio company, ShowPlex Cinemas, and Starplex Cinemas to position the new company for growth. The merger created a top-12 theatre chain with 32 locations and over 320 screens with operations in 12 states throughout the United States. Trinity Hunt remained a significant shareholder and Board member while Starplex’s management team, led by Steve Holmes, an industry veteran and former Chief Financial Officer of Cinemark and Chief Executive of Silver Cinemas, assumed responsibility for day-to-day management of ShowPlex’s theatres.

“The addition of ShowPlex’s quality assets complemented Starplex’s growing domestic footprint, including the expansion of our presence in the Midwest market,” stated Mr. Holmes.

“Starplex was known for offering quality films in state-of-the-art auditoriums at affordable prices. I was confident that ShowPlex’s commitment to providing customers an exceptional movie-going experience would be further enhanced under the Starplex management team’s leadership,” said Dan Dross, managing partner at Trinity Hunt Partners.

Over the next three years, Trinity Hunt and Starplex executed a strategic growth plan that resulted in revenues and theatre-level cash flow growth of greater than 45 percent through the addition of five new locations and remodeling of several existing locations. The company added reclining luxury seats in select locations, large format screens (including IMAX) in certain markets, digital menu boards and in-lobby trailers and fully digital projection. As a result of these initiatives, Starplex enjoyed above industry average attendance growth and theatre-level cash flow margins. In December 2015, Starplex Cinemas was sold to AMC Entertainment Holdings, Inc. for approximately $175 million, subject to final working capital and other adjustments.

“We have always strived to provide an exceptional entertainment experience for our customers through luxurious amenities and unmatched customer service,” said Mr. Holmes. “By partnering with Trinity Hunt, we were able to accelerate our growth by enhancing our customer offerings and expanding our geographical reach by opening additional theatres throughout the country.”

“We greatly enjoyed working with the Starplex Cinemas management team to grow their theatre circuit and enhance their reputation for providing customers with state-of-the-art amenities,” said Mr. Dross. “Our partnership proved to be successful, and with AMC, Starplex’s theatres are well positioned to continue providing a premiere movie-going experience.”

Disclaimer: All information provided herein is for informational purposes only, this case study is illustrative of the types of investments the adviser would make, and should not be relied upon to make an investment decision. Past performance results relate only to the time periods indicated and are not an indication of, nor a reliable proxy for future performance. An investor runs the risk of losing all of its investment. This presentation is neither an offer to sell nor a solicitation of any offer to buy any securities, investment products or investment advisory services