Trinity Hunt Revamps Theater Chain for AMC Deal

The Dallas-based private equity firm sold Starplex Cinemas to AMC for $175M. Dan Dross, managing partner, discusses how Trinity Hunt Partners took the smaller chain to the next level for the exit.

Trinity Hunt Partners recently announced that the Department of Justice has approved the roughly $175M sale of its portfolio company, Starplex Cinemas—a movie theater chain with 33 locations throughout 12 states—to the powerhouse AMC Entertainment Holdings, Inc.

The Dallas-based private equity firm merged its portfolio company, ShowPlex Cinemas—purchased in 2010—with Starplex Cinemas after that company was acquired in December 2012 in an effort to facilitate growth.

“We liked Starplex because it had a lot of differentiated strategies that we found attractive,” says Dan Dross, a managing partner at Trinity Hunt. “First of all, the company operated in a lot of secondary markets where they benefited from limited to no competition. And secondarily, they really had first-class amenities that they offered their patrons, combined with certain value-pricing strategies which allowed them to enjoy above-average attendance growth on a relative-to-the-industry [basis] during the entire time period we were investors with the company.”

A little-known fact is that the movie theater industry is resilient in tough times. But Trinity had an idea. Dross says that the firm was looking for industries that exhibited vitality and even growth during slower economic periods.

“If you go back and look at the history of the performance of the [movie theater] industry throughout recessionary times, it’s actually shown not only stability but growth,” he says. “For instance, in 2009, box office revenues were up over 10 percent, and there were probably very few industries that you could see that had double-digit top-line growth during that year.”

During Trinity’s investment timeline, the firm continued to expand Starplex by opening five new locations and remodeling select existing locations. It added value by installing luxury reclining seats in a number of Starplex’s auditoriums, adding large-screen formats such as IMAX in some locations, installing digital projection throughout all locations, and expanding concession menus; some locations even began to serve alcoholic beverages.

“Starplex was on the forefront of some of the changes that the industry has witnessed over the last several years,” says Dross. “The luxury reclining seats have become popular in a lot of markets, and Starplex saw that trend and got ahead of it. And AMC—which has similarly been at the forefront of that trend—recognized that Starplex had already made those investments in a number of locations. And that’s why they found the opportunity attractive.”

The success of Starplex was also due to its experienced and talented management team, says Dross. Trinity did not bring in any sort of operating partner.

“We really prefer to support the incumbent management teams at the companies we invest in,” he says. “[Starplex’s management team] was a big component of the success of the company and our investment.” But Trinity continued to be active at the board level and supported the team with some of the initiatives it undertook during the firm’s hold period. “We continued to help the company identify new markets that were underserved and helped arrange for some acquisitions of one-off theaters that were being sold by other circuits,” says Dross.

Trinity is no newcomer to the entertainment industry. Using the same fund from which it invested in Starplex, the firm made another investment in a media- and entertainment-related company: DMX Music, which provided pre-programmed music to retailers, restaurants, and hospitality establishments. “After a couple of years backing the management team, we successfully exited that investment,” says Dross.