Entertainment One builds alliance as it adds Pulp Fiction to its library

By GARETH MACKIE
Published on 07/09/2012 23:36

ENTERTAINMENT One, the London-listed media group that produces the Peppa Pig cartoon and distributes the Twilight vampire film series, is set to add Lord of the Rings and Pulp Fiction to its library after agreeing to buy Canadian peer Alliance Films for up to C$272 million (£173.6m).

Under the deal, Entertainment One will pay some C$225m for Alliance, which trades as Momentum Pictures in the UK and also operates in Canada and Spain. A further C$47m may be due after the transaction completes, based on box office performance and tax provisions.

As well as Peppa Pig and Twilight, Toronto-based Entertainment One distributes zombie drama The Walking Dead and owns one of the fastest-growing independent record labels in the US.

Alliance Films is the third-largest film distributor in Canada and the ninth-largest in the UK, and the deal would create a group with a combined library of more than 35,000 film and television titles, including Good Will Hunting, The Hunger Games and The King’s Speech.

Talks over the acquisition, which will be funded through debt financing and a £110m share placing, began in May and it is believed that Goldman Sachs, which owns around two-thirds of Montreal-based Alliance Films, has been looking for a buyer for the company since January.

Investissement Québec, the investment arm of the provincial government, owns the remaining third.

Entertainment One chief executive Darren Throop said: “The combination of Entertainment One and Alliance creates a market-leading film distribution business which, alongside our television and family divisions, will deliver a strong strategic platform for long term growth.”

Peel Hunt analyst Patrick Yau described the deal as “good value” and said it will open up new markets for Entertainment One, which began life almost 40 years ago as a music retailer called Records on Wheels. Yau added: “We believe it will provide the platform for strong growth over the medium term in an industry that is both global and resilient. The deal is likely to complete early next year, but we see no major issues to approval.”

The deal needs the green light from the Canadian Competition Bureau, and Entertainment One will seek investor approval for the share placing at a special meeting to be held on 28 September.

Throop added: “I am extremely excited by the opportunities available to us to grow the enlarged group and we look forward to representing the very best in independent film across all of our markets. This acquisition means that Entertainment One is better positioned than ever to generate significant value for shareholders.”

The success of the Twilight Saga helped revenues at Entertainment One’s film division rise 17 per cent to £272m last year as it hit number one at cinemas and on DVD in the UK and Canada. Total revenues rose 7 per cent to £502.7m, and pre-tax profits for the group jumped 33 per cent to £43m in the year to 31 March.

Shares in the group jumped 15.5p, or 10 per cent, to 171p following the news.