Finance experts told investors that Imax's attempt to highlight the value of its China business via a separate stock listing in the market has failed to play out as hoped so the decision to buy in the unit makes sense.
, who has a “buy” rating and $26 stock price target on Imax, for example, lauded the transaction, expected to close by the end of the year, for providing “attractive structural, financial, and strategic benefits.”
Expanding on the corporate structure impact of the proposed transaction, he explained: “Having 100 percent ownership of Imax China will help simplify Imax’s financial reporting and challenges in estimating the minority impact of the subsidiary on adjusted earnings before interest, taxes, depreciation and amortization . Furthermore, we believe Imax China was unable to realize its full value due to a severe lack of liquidity and low trading volume.
Detailing the financial benefits of buying full control of Imax China, Handler highlighted that the change “should be immediately accretive to earnings.” In addition, Imax will benefit from about $2 million in cost savings from not operating a second publicly traded company, plus achieve “certain tax efficiencies and flexibility in group cash planning and usage.
Plus, Handler also outlined strategic benefits. “Full ownership of Imax China will increase Imax Corp.’s flexibility in pursuing certain growth initiatives in Greater China, as well as providing greater flexibility for long-term strategic options,” he wrote. For example, Imax wasn’t able to operate its SSIMWAVE streaming technology business in China because Imax China didn’t have any ownership in it.
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