After forging a partnership in January to buy distribution rights for independent films, Cinedigm says it will pay at least $14M to buy distribution firm New Video Group outright. The combination will “create a new full service end-to-end digital releasing studio” and enable Cinedigm “to acquire and distribute independent films and specialty content both theatrically and through digital, mobile and home media platforms,” the companies said. New Video co-Presidents Steve Savage and Susan Margolin were named co-Presidents of Cinedigm’s Entertainment Group, which will include their company plus Cinedigm’s theatrical marketing and booking services. They’ll report to Cinedigm CEO Chris McGuirk, who’s engaged in an ambitious effort to boost the company’s output of digitally distributed alternative entertainment for movie theaters. In conjunction with this announcement, Cinedigm says that it will underwrite a public offering of 6M of its Class A shares. Cinedigm’s stock spiked in early February but is down nearly 24% over the last 12 months. Here’s the release about the New Video deal:
(Woodland Hills, CA and New York City, NY; April 19, 2012) – Cinedigm Digital Cinema Corp. (NASDAQ: CIDM) (“Cinedigm” or the “Company”), the global leader in digital cinema, today announced it has agreed to acquire leading entertainment distributor New Video Group, Inc. (“New Video”), the largest worldwide digital aggregator of independent content and leading distributor of quality entertainment. Cinedigm’s acquisition of New Video will create a new full service end-to-end digital releasing studio, enabling the Company to acquire and distribute independent films and specialty content both theatrically and through digital, mobile and home media platforms.
Cinedigm has agreed to acquire New Video for $14 million in upfront consideration, plus additional earn out potential of up to $6 million over three years tied to the future financial results of the Cinedigm Entertainment Group. The upfront consideration will be paid with $10 million of cash from Cinedigm’s balance sheet and $4 million of Cinedigm stock issued at the trailing 10 day volume weighted average price. The acquisition is expected to close April 20, 2012. Simultaneous with this acquisition, Cinedigm has also announced an underwritten public equity offering of common stock with B. Riley & Co., LLC acting as sole book-running manager and Merriman Capital acting as co-manager of the offering. Please see our separate press release on the offering.
This acquisition builds upon the strategic acquisition and distribution partnership for independent films formed in January between Cinedigm and New Video. Already, the joint venture has acquired two award-winning films at Sundance and SXSW, The Invisible War and Citadel, which are planned for release in June and September respectively and today also announced the acquisition of a third highly regarded independent film, In Our Nature.
“Cinedigm is now a fully integrated distributor of independent films and specialty content,” said Cinedigm Chairman and CEO Chris McGurk. “Over the past year, we have analyzed many companies in the digital distribution space for home and mobile entertainment and determined that New Video is the best partner for us. New Video’s highly regarded management team, led by Susan Margolin and Steve Savage, is entrepreneurial, forward-looking and innovative. Their tremendous success in the ever-evolving digital space, combined with their expertise in content acquisition, sales and marketing and distribution of traditional packaged goods, puts them clearly ahead of the pack. Our new distribution capabilities will provide a unique, one stop end-to-end digital distribution solution for independent content providers and financiers. And for our shareholders, this accretive acquisition solidifies Cinedigm’s stated goal to expand our low risk, high reward fee-for-service content distribution business to complement our industry leading VPF servicing and software businesses.”
Adam Mizel, Cinedigm Chief Operating Officer and CFO, added: “Our acquisition of New Video® has met our stated criteria to make an accretive acquisition of a leading home entertainment content distributor through all channels of distribution. The $14 million upfront purchase price represents a multiple of approximately 5.6x New Video’s 2011 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Bringing Cinedigm and New Video together in addition to our capital raise provides the necessary ingredients to rapidly build a profitable independent film and alternative content business.”
“This combination creates a very powerful distribution machine at a time when the industry is at the crossroads of profound change and real strategic opportunity,” said Steve Savage, Co-President of New Video. “Cinedigm is the perfect partner for expanding the market for feature film and entertainment content, while exploiting every opportunity for innovation in VOD, digital and mobile distribution.
“Filmmakers and content creators will greatly benefit from our leading-edge digital distribution strategies,” added Susan Margolin, Co-President of New Video. “Steve and I and the entire New Video team look forward to expanding on what has already proven to be a fruitful and promising partnership with Cinedigm.”
Effective immediately Savage and Margolin will become co-Presidents of Cinedigm’s Entertainment Group, which includes New Video as well as the pre-existing theatrical marketing and booking services at Cinedigm, and will report directly to McGurk. Aimee Connolly, New Video’s Chief Operating Officer, will assume the same position for the Cinedigm Entertainment Group.
New Video was represented in the transaction by Stephen Einhorn.
Headquartered in New York City, New Video was founded in 1991 to acquire and distribute alternative and independent film content using both fee-based and royalty-based models. New Video has since acquired licenses for more than 4,000 feature films and 6,000 television episodes. New Video has key relationships with platform partners including Netflix, iTunes, Amazon, Vudu, Hulu, Xbox and PlayStation, as well as leading brands A+E, Scholastic, Tribeca Film, ZDF, Henson, Beyond International and ITV. The company has delivered strong results in DVD/Blu-ray, returning over $1.5 billion to content owners since its founding more than 20 years ago.