29 Sep 2008 07:00
RNS Number : 5074E
Entertainment One Ltd
29 September 2008
29 September 2008
Entertainment One Ltd.
Proposed recommended reverse takeover transaction with DHX Media
Enlarged Group to be listed on TSX and AIM
Highlights:
·; Strengthens Entertainment One's position in international filmed content and distribution
·; Enlarged Group to be listed on the TSX and AIM
·; Pro forma combined revenues of approximately £350 million and EBITDA of £29 million
·; Key senior management of DHX will remain with the business
Entertainment One Ltd. ("Entertainment One" or the "Company") (AIM: ETO) today announces that it has entered into a conditional agreement to combine its operations with those of DHX Media Ltd. ("DHX") (AIM / TSX: DHX) (together the "Enlarged Group").
The combination will be structured as a reverse takeover of Entertainment One by DHX (the "Proposed Transaction") for the purposes of Rule 14 of the AIM Rules for Companies and will require approval of the shareholders of Entertainment One and DHX. Following closing of the Proposed Transaction, the Enlarged Group will be named Entertainment One. The Proposed Transaction has been recommended by the boards of directors of both Entertainment One and DHX and values the total issued share capital of DHX at approximately C$68 million (the "DHX Value"), representing C$1.59 per share. It is intended that the Enlarged Group will have a primary listing on the Toronto Stock Exchange ("TSX") and a secondary listing on AIM.
DHX is an international producer and distributor of television programming and interactive content based in Canada with operations in the UK, focussed on the children's and youth television market. DHX owns one of the world's largest independent children’s content libraries and to date has entered into over 1,300 separate television licence agreements with over 250 customers worldwide.
Darren Throop, CEO of Entertainment One, said:
“The combination with DHX significantly expands our television division, providing excellent production capabilities and a large library of titles across mainstream and children’s programming. The resulting primary TSX listing will allow the Enlarged Group to access a significantly more developed North American entertainment investor base in order to properly reflect the underlying value of the group as it delivers on its strategy to build the world's leading international independent entertainment content and distribution business. In addition, the board will continue to actively consider plans to move the UK listing of the Enlarged Group to the main market of the LSE.”
The Proposed Transaction will boost Entertainment One’s overall content and distribution capabilities, adding approximately 60 original television series and over 2,200 half-hours of original programming to its existing television division, including successful productions The Guard, This Hour Has 22 Minutes, Franny's Feet, Bo On The Go and Martha Speaks. Following closing, the Enlarged Group will control a library of over 2,000 hours of original television programming, alongside Entertainment One's existing feature film library of over 3,700 titles.
In the year to 30 June 2008, DHX generated revenue of C$52.5 million, adjusted pro-forma EBITDA of C$5.9 million and loss before tax (after all exceptional and one-off items) of C$0.9 million. Based on the last audited financial statements of Entertainment One and DHX and taking full account of acquisitions made during the year, the Enlarged Group will have combined pro-forma revenue of approximately £350 million (C$665 million) and adjusted EBITDA of approximately £29 million (C$56 million).
Darren Throop, currently CEO of Entertainment One, will be appointed as CEO of the Enlarged Group. Key senior management of DHX are expected to remain with the DHX business which will form part of the television division of the Enlarged Group, overseen by Patrice Theroux, Entertainment One President of Filmed Entertainment.
Michael Donovan, CEO of DHX, said:
"Joining forces with Entertainment One represents the next logical stage in the development of DHX. The Enlarged Group will provide DHX with access to the U.S. and international home entertainment markets and will offer further distribution capabilities for our growing children’s library. The consolidation occurring in the digital and media landscape increasingly requires scale to compete and to exploit emerging opportunities. The Enlarged Group will also offer DHX shareholders the opportunity to participate in one of the largest fully integrated independent content creation and distribution companies in the world.”
Pursuant to the terms of the Proposed Transaction, Entertainment One shareholders will receive one newly issued common share of DHX for each Entertainment One share held. DHX shareholders will be offered the alternative of receiving either 0.9409 newly issued common shares of DHX for each existing DHX share held or C$0.3975 in cash and 0.7057 newly issued common shares of DHX for each existing DHX share held.
If all DHX shareholders elect the cash and share alternative, upon completion of the Proposed Transaction, Entertainment One shareholders will own approximately 83 per cent of the Enlarged Group. If all DHX shareholders elect the all share alternative, upon completion of the Proposed Transaction, Entertainment One shareholders will own approximately 79 per cent of the Enlarged Group.
Enquiries:
| Quiller Consultants | John Eisenhammer | +44 (0) 20 7233 9444 |
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| Edelman | Shane Dolgin | +1 416 979 1120 |
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| Entertainment One | Giles Willits | +44 (0) 20 7004 2755 |
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| Kaupthing Singer & Friedlander Capital Markets Limited (NOMAD to Entertainment One) | James Maxwell / Marc Young | +44 (0) 20 3205 7500 |
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| DHX | David A. Regan (Investor Relations | +1 902 423 0260 |
| | Renee Pye (Public relations) | +1 902 423 0260 |
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| Grant Thornton UK LLP (NOMAD to DHX) | Gerry Beaney | +44 (0) 20 7383 5100 |
Notes to Editors:
Entertainment One Ltd. (AIM: ETO) AIM listed, Entertainment One's strategy is to build the leading global independent entertainment content ownership and distribution business that acquires films, television programs and music content and exploits these rights in all media throughout the world. Entertainment One has operations in Canada, the U.S, Holland, Belgium and the UK. Entertainment One also owns Koch Entertainment, the largest independent record label in North America and a leading independent distributor of music and video in the United States.
www.entertainmentonegroup.com
DHX Media Ltd. (AIM / TSX: DHX) Aim listed, DHX is a leading international producer and distributor of television programming and interactive content with an emphasis on children, family and youth markets. DHX shares trade on AIM and are listed on the TSX, the Toronto Stock Exchange. DHX’s production companies, Decode Entertainment, Halifax Film and Studio B Productions, are the producers or co-producers of 14 original television series and theatrical releases currently commissioned for production and maintain a growing library of over 2,200 half-hours of mostly children and youth-oriented television productions.
www,dhxmedia.com
The release, publication or distribution of this announcement in jurisdictions other than Canada and the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than Canada and the UK should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purpose of complying with applicable Canadian law and the AIM Rules for Companies, and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions other than Canada and the UK.
Any person (including, without limitation, any custodian, nominee and trustee) who would, or otherwise intends to, or who may have a contractual or legal obligation to, forward this announcement and/or any other related document to any jurisdiction other than Canada and the UK should inform themselves of, and observe, any applicable legal and regulatory requirements of that jurisdiction.
For US securities law purposes, the transaction described in this announcement will be made for the securities of a foreign company by means of a scheme of arrangement under Cayman Islands law and a plan of arrangement under Canadian law. The offer is subject to disclosure and procedural requirements of a foreign country that are different from those which would apply in the United States. It may be difficult for you to enforce your rights and any claim you may have arising under United States federal securities laws, since each of DHX and Entertainment One is located in a foreign country, and some or all of its respective officers and directors may be residents of a foreign country. You may not be able to sue DHX or Entertainment One or their respective officers or directors in a foreign court for violations of US securities laws. It may be difficult to compel DHX or Entertainment One or their respective its affiliates to subject themselves to a US court’s judgment. This document has not been reviewed by any federal or state securities commission or regulatory authority in the United States, nor has any such commission or authority passed upon the accuracy or adequacy of this document. Any representation to the contrary is unlawful and may be a criminal offence.
Not for release, publication or distribution, in whole or in part, in or into or from any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.
Forward-Looking Statements
Certain statements herein relating to the Proposed Transaction are forward-looking statements and represent DHX and Entertainment One’s current intentions in respect of future activities. These statements, in addressing future events and conditions, involve inherent risks and uncertainties. Forward looking statements can by identified by the use of the words “will”, “expect”, "seek," "anticipate," "believe," "plan," "estimate," "expect," and "intend" and statements that an event or result "may," "will," "can," "should," "could," or "might" occur or be achieved and other similar expressions. Forward-looking statements involve significant risk, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this release are based upon what management of DHX and Entertainment One believes to be reasonable assumptions, DHX and Entertainment One cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this release and DHX and Entertainment One assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law. Many factors could cause the actual results, performance or achievements of DHX and Entertainment One to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including: general economic and market segment conditions, competitor activity, product capability and acceptance, international risk and currency exchange rates and technology changes. More specific risks include that the merged entity will not be able to realize some or all of the expected synergies due to incompatibilities in the merging businesses, the inability of management to bring about such synergies or a changing business environment rendering such synergies inadvisable or uneconomical. After integrating the businesses the suite of service offerings may not perform as expected if shifting demand moves in a direction away from the expected business model of the merged entity, if competitors are able to take market share away from the merged entity or if changing technology adversely impacts the merged businesses. In addition, while DHX and Entertainment One expects their partners to continue and expand their relationship with the merged entity, there can be no assurance that such relationships will continue as expected.
Transaction Summary
The terms of the Proposed Transaction are governed by an Arrangement Agreement between Entertainment One and DHX (the "Arrangement Agreement").
The Proposed Transaction will be implemented by way of a scheme of arrangement under Cayman Islands law (in relation to Entertainment One shareholders) (the “Entertainment One Scheme of Arrangement”) and a plan of arrangement under Canadian federal law (in relation to DHX shareholders) (the “CBCA Plan”). Notices of the shareholder meetings and a joint proxy circular, together with the Admission Document prepared in accordance with Rule 14 of the AIM Rules for Companies, will be sent to the respective shareholders of DHX and Entertainment One in due course. Details of the proposed shareholder resolutions will be set out in the respective notices and joint proxy circular. It is expected that the notices will be mailed before the end of November 2008 and the Proposed Transaction is expected to be completed by the end of December 2008. Holders of DHX common shares that fail to make an election prior to the designated closing date of the Proposed Transaction will be deemed to have elected to exchange their common shares pursuant to the All Share Alternative.
Pursuant to the Arrangement Agreement, shareholders of DHX will have the opportunity to elect either an “All Share Alternative” or a “Cash and Share Alternative” in respect of all of their DHX common shares. Those DHX shareholders who elect the All Share Alternative will receive 0.9409 of a new common share of DHX in exchange for each old common share held, while those shareholders who elect the Cash and Share Alternative will receive C$0.3975 in cash and 0.7057 of a new common share of DHX in exchange for each old common share held. Holders of Entertainment One ordinary shares will receive one common share of DHX for each Entertainment One ordinary share held.
Following closing of the Proposed Transaction, DHX will be the surviving parent corporation and will be renamed "Entertainment One". It is intended that the new common shares of DHX to be issued pursuant to the Proposed Transaction will be listed on both AIM and the Toronto Stock Exchange.
Pursuant to the CBCA Plan, all outstanding options and share purchase warrants to acquire common shares of DHX will be exchanged for new options, warrants and rights to acquire 0.9409 new common shares of DHX for each common share previously subject to such options and share purchase warrants, and otherwise having the same respective terms. All outstanding options, share purchase warrants and other rights to acquire ordinary shares of Entertainment One will, subject to receipt of the consent of the holders thereof, be exchanged for new options, warrants and rights to acquire the same number of new common shares of DHX having the same respective terms.
Immediately following closing of the Proposed Transaction, assuming that:
·; all DHX shareholders elect the All Share Alternative, 40,254,842 new common shares will be issued and there will be 187,239,753 new common shares of DHX outstanding; and
·; all DHX shareholders elect the Cash and Share Alternative, 30,192,201 new common shares will be issued and there will be 177,177,112 common shares outstanding in DHX.
The closing of the Proposed Transaction is subject to certain conditions specified in the Arrangement Agreement, including:
·; receipt of interim and final orders in respect of the Entertainment One Scheme of Arrangement in the Cayman Islands by the Grand Court of the Cayman Islands and the CBCA Plan by the Ontario Superior Court of Justice;
·; receipt of approvals of the Proposed Transaction by the shareholders of both Entertainment One and DHX at special meetings to be convened following receipt of the above-mentioned interim orders;
·; receipt by Entertainment One and DHX of consents of their respective significant lenders;
·; receipt of approval of the TSX to the Proposed Transaction; and
·; re-admission of the new common shares of the Enlarged Group to trading on AIM.
The CBCA Plan will require the approval of at least 66 2/3 per cent of the votes cast by DHX shareholders at the DHX meeting. The Entertainment One Scheme of Arrangement will require (A) the approval of (i) 75 per cent of the holders of Entertainment One ordinary shares present and voting, whether in person or proxy, at the Entertainment One meeting, and (ii) 75 per cent of the holders of Entertainment One Class S shares present and voting, whether in person or proxy, at the Entertainment One meeting and (B) the approval of the de-listing of Entertainment One ordinary shares from AIM by 75 per cent of holders of the Entertainment One ordinary shares and the Entertainment One Class S shares, in each case present and voting, whether in person or proxy, at the Entertainment One meeting.
Entertainment One has received voting support agreements from certain members of Entertainment One senior management and Marwyn Neptune Fund LP to vote in favour of the Proposed Transaction at the Entertainment One shareholder meeting representing in aggregate 37,470,316 ordinary shares and approximately 28.8 per cent. of Entertainment One’s total issued ordinary share capital. In addition, holders of Class S shares have agreed to provide undertakings to vote in favour of the Proposed Transaction at the Entertainment One shareholder meeting, representing in aggregate 16,899,762 Class S Shares and 100 per cent. of the Entertainment One's total issued Class S Shares. DHX has received voting support agreements from certain members of DHX senior management to vote in favour of the Proposed Transaction at the DHX shareholder meeting representing in aggregate 14,368,852 common shares and approximately 33.6 per cent of DHX's outstanding common shares.
GMP Securities L.P., financial advisor to DHX, has provided to DHX’s board of directors a fairness opinion that concludes that the Proposed Transaction is fair to DHX shareholders from a financial point of view. DHX’s board of directors, based on the recommendation of an independent committee of such board, has determined that the Proposed Transaction is in the best interests of DHX and its shareholders. Entertainment One is being advised in Canada by TD Securities Inc.
Certain management and other shareholders of DHX and Entertainment One have entered into lock-in undertakings in connection with the Proposed Transaction, and will, subject to certain exceptions or to the consent of the Enlarged Group, be restricted from selling shares held in the Enlarged Group for twelve months from closing.
A break fee equal to approximately 3.5 per cent of the DHX Value or C$2.38 million may be payable by either party in certain instances, including in the event that DHX enters into an agreement in respect of a Superior Proposal to acquire DHX (as defined in the Arrangement Agreement) or Entertainment One enters into an agreement in respect of an Acquisition Proposal in respect of Entertainment One (as defined in the Arrangement Agreement).
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