Alton Irby, Chairman of ContentFilm plc (‘Content Film’ or ‘the Company’) announces that the Company is in negotiations with the board and major shareholders of First Look Media, Inc. (‘First Look’) to acquire First Look. Completion of the transaction will be subject to definitive documentation, due diligence and any necessary shareholder approval.
Key Points
- The combination with First Look would represent the first major strategic step in the development of ContentFilm since it joined the AIM market of the London Stock Exchange in March 2004.
- First Look would bring two significant strategic assets that fit well with ContentFilm’s goals: a North American home video and DVD distribution business and a film library of some 350 titles with largely world-wide rights.
- The combination with First Look would more than double ContentFilm’s revenue base and international sales operation.
- The combination is likely to involve the assumption of approximately $12 million of First Look debt by ContentFilm and ContentFilm’s issuance of common stock and payment of cash representing approximately $15 million in consideration, the equity equivalent of approximately $1.00 per share of First Look.
- The proposed combination is conditional upon inter alia, due diligence and agreeing and entering into legally binding documentation. The Board will also seek the approval of ContentFilm’s shareholders at an Extraordinary General Meeting.
John Schmidt and Ed Pressman, Joint Chief Executives of ContentFilm, said: “In March, when ContentFilm came to the London market through the merger with Winchester Entertainment, we highlighted to shareholders that the potential of the new group would be maximised through further strategic transactions, especially in the area of international film distribution and film libraries. This combination is precisely the kind of deal we have been looking for, and we are delighted that First Look could be joining the group so early in our history. There are limited points of entry into the North American video business and First Look has built a significant business in this sector which is poised for further growth. Additionally, First Look’s library brings critical mass to our worldwide sales operation and existing library and a steady source of earnings and cash flow. Chris Cooney and Bill Lischak have done a great job of bringing First Look to its present state of stable revenue and positive cash flow and we look forward to the opportunity of working with them to build both companies’ success from here.” For enquiries, please contact: Tim Allan, Portland, for ContentFilm plc 020 7404 5344
Introduction
ContentFilm plc is delighted to announce that it is in negotiations to acquire First Look Media, Inc., a North American media company with four lines of business:
- First Look Home Entertainment – a US video and DVD distribution operation;
- First Look International (formerly Overseas film group) – an international sales operation, licensing movies outside the US market;
- First Look Pictures – a US theatrical releasing operation focusing on independent films; and
- First Look Artists – a TV commercial production and ‘branded content’ operation.
In the year to 31 December 2003, First Look achieved audited revenues of US$28.3m (approximately £15.4m) and generated cash of approximately $7 million (approximately £3.8 million). The majority of First Look’s turnover was generated by First Look International, with First Look Home Entertainment generating the second largest component. First Look has a library of approximately 350 titles, including Evelyn (which stars Pierce Brosnan and was released by MGM in the U.S. and Pathe in the U.K.), Waking Ned Devine (the 1998 hit which was released by Fox in the U.S. and achieved over $25 million in U.S. box office), Antonia’s Line (which won the Best Foreign Language Film Academy Award in 1996), God’s Army (the Christopher Walken supernatural hit with grossed over $17 million in U.S. box office and resulted in five sequels) and Titus (with Anthony Hopkins and Jessica Lange, the film was the feature film directorial debut from Lion King creator, Julie Taymor). Upcoming films include the Joel Silver produced, Dungeon’s & Dragons II, Cake (starring Heather Graham, Cheryl Hines, Sandra Oh and Taye Diggs), Stateside (starring Val Kilmer, Rachael Leigh Cook, Jonathan Tucker and Agnes Bruckner) and Mayor of the Sunset Strip (an inside look at the LA music scene from the vantage point of LA scenester, “Rodney on the ROC”). Additionally, the company is releasing the television series “Unsolved Mysteries” on video and DVD this year. It is anticipated that consideration will be predominantly satisfied by the issue to the owners of First Look of new ordinary shares in ContentFilm, with the remainder being paid in cash. It is expected that should the merger with First Look be successfully concluded, Chris Cooney, Co-Chairman and Chief Executive officer of First Look Media would join the board of ContentFilm plc.
Background to the merger
First Look is a publicly-held US film distribution and sales company currently employing 45 staff with offices in New York and Los Angeles. It has two principal operations, its home video and DVD division, and its worldwide sales operation, both supported by its 350 title film library. The Directors of the Company believe that these assets are strategically valuable and have the potential to be enhanced in the context of a larger group. First Look Home Entertainment is the fastest growing of First Look’s divisions and one of the leading independent rental distributors of video and DVD in the US. Its management was strengthened in February 2004 with the recruitment of Lions Gate’s Sell-Thru team which played a key role in the rapid growth of Lions Gate’s own video division. Around the world, film libraries are realising increasing values as DVD (with high definition DVDs still in the pipeline) provides new ways for owners of content to repackage and remarket their products. The Directors believe that the merger would represent an excellent opportunity to gain access to North America’s video and DVD industry, as well as a significant number of video and DVD rights in many international territories. In addition, the steadiness and reliability of the income stream from film libraries make them a valued counter to the traditionally uneven revenue profile of film production. First Look’s library of 350 titles would give the Company critical mass in this sphere of its operations, bringing the enlarged group’s library to over 420 films.
Update on ContentFilm
The merger of ContentFilm, Inc. and Winchester Entertainment Plc was completed on 29 March 2004. Since that date, the integration process has progressed as planned. As a result of a full review of operations in London and Los Angeles, overall employee numbers have been reduced. In addition, the Company has rationalised its property base by sub-letting the two London offices and consolidating all employees in one location and by closing Winchester’s Los Angeles office. These changes are expected to result in annual cost savings of around £1m. The Company recently announced its commitment to act as an international sales agent on ‘Burns’, the film biography of Scotland’s national poet that will star Gerard Butler (also the star of ‘The Phantom of the Opera’, currently in post-production for release in December 2004) and be directed by Vadim Jean (‘Leon the Pig Farmer’). In addition, ContentFilm will handle the international sales and UK distribution for a new slate of three feature films to be produced by Fast Forward Features, a low budget production initiative backed by the BBC and Scottish Screen. On the 17th May this year, ContentFilm announced the appointment to its Board of Trudie Styler, the independent film producer. The Company expects to announce its result for the year to 31 March 2004 on 23 June 2004.
Notes:
- ContentFilm is the only quoted film production and distribution company in the London market where it is listed on the Alternative Investment Market of the London Stock Exchange.
- ContentFilm plc was formed in March 2004 by the reverse takeover of Winchester Entertainment by ContentFilm, Inc. in a transaction that valued the whole group at £25.5m.
- The merger of ContentFilm and Winchester Entertainment announced on 3 March 2004 included the placing of 32.69m Convertible Redeemable Preference Shares which are directly convertible into Ordinary Shares in ContentFilm Plc.
- ContentFilm is managed by co-chief executives John Schmidt (formerly chief financial officer of Miramax and co-founder and co-president of October Films) and Ed Pressman (a leading American film producer with some 65 titles to his credit). The Company is chaired by Alton Irby, a founding co-partner in Hambro Magan and founding partner of Tricorn Partners, a privately held investment bank.
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