Cinedigm
Corp. (NASDAQ: CIDM) (“Cinedigm” or the “Company”) today announced
it has agreed to acquire Gaiam, Inc.’s (NASDAQ: GAIA) entertainment
unit, known as “GVE,” a leading distributor of home entertainment brands
and content, for $51.5 million. Gaiam will retain its health and fitness
media business. Cinedigm’s acquisition of GVE positions the Company as
the market leader for independent film, TV and digital content
distribution on every key entertainment platform, retailer and device
across theatrical, the home and mobile. This accretive acquisition is
expected to add more than $15 million of annual EBITDA to Cinedigm’s
financial results.
When combined, Cinedigm and GVE will have:
-
A market position as the largest aggregator and distributor of
independent content and the fourth largest distributor of
non-theatrical DVD’s and Blu-Ray discs in the U.S.
-
Annual retail sales exceeding $320 million from both physical products
and digital sales;
-
Exclusive, multi-year relationships with a wide range of brand name
content suppliers, including WWE, NFL, Hallmark, National Geographic,
Discovery, Scholastic and The Jim Henson Company;
-
Direct sales and marketing relationships with almost every major
physical and digital retailer, including Wal-Mart, Target, iTunes,
Netflix and Amazon;
-
A huge library of digital distribution rights for independent films,
TV series and other content that includes more than 32,000 titles and
episodes
-
The largest physical retail footprint of any independent studio
distributor in the United States, with products sold through over
60,000 retail locations; and,
-
Strong, experienced corporate and operating management bolstered by
the addition of many key GVE employees.
Cinedigm has agreed to acquire GVE for $51.5 million, subject to working
capital adjustments. The acquisition will be financed through a
combination of: (i) a new $55 million senior-secured credit facility
arranged and led by Société Générale Corporate and Investment Banking
that includes a $25 million 3-year term loan funded at closing and an up
to $30 million revolving credit facility of which $15 million will be
drawn at closing; (ii) an up to $5 million subordinated 5-year loan
facility; (iii) $3 million of restricted Cinedigm stock of which $1
million was issued to Gaiam and $2 million was purchased by an existing
shareholder; (iv) an up to $13.0 million underwritten public offering of
common stock, inclusive of an up to $1.5 million over-allotment, with B.
Riley & Co., LLC and National Securities Corporation, a wholly owned
subsidiary of National Holdings, Inc. (OTCBB:NHLD), acting as co-lead
managers. The acquisition is expected to close October 21, 2013.
Blackstone Advisory Partners L.P. acted as financial advisor to the
Company in connection with the acquisition of GVE and Merriman Capital
acted as capital markets advisor for the equity offering. Please see our
separate press release on the underwritten public offering.
“This acquisition of GVE gives Cinedigm immediate scale and leverage
across the entire entertainment value chain. The combination of GVE’s
deep stable of consumer-friendly brands and unique direct retail
relationships – paired with Cinedigm’s tremendous strength in the
rapidly evolving digital distribution space as well as our theatrical
releasing and over-the-top network businesses -- creates a powerful and
game-changing entity poised to take full advantage of the content
distribution revolution,” said Cinedigm Chairman and CEO Chris McGurk.
“This accretive acquisition fully complements our existing businesses,
while providing immediate scale, EBITDA, cash flow, cost and revenue
synergies, strong new management and tremendous opportunities for
further growth.”
Adam Mizel, Cinedigm Chief Operating Officer and CFO, added: “Our
efforts over the last 2 years to transform Cinedigm and completely
refinance our balance sheet were designed in part to prepare us for a
smart, accretive acquisition like GVE that would leverage our strong
position in the digital entertainment revolution and dramatically
accelerate our growth strategy. The $51.5 purchase price represents a
multiple of approximately 3.3 times GVE’s 2013 estimated adjusted
earnings before interest, taxes, depreciation and amortization (EBITDA).
We are particularly appreciative of the support we have received from
our long term lead lender Société Générale as well as the support in our
equity offering from many of our largest shareholders and our
underwriting partners and advisors at B. Riley, National Securities and
Merriman Capital”
Effective immediately GVE President Bill Sondheim will become President
of Cinedigm’s Entertainment Group (CEG), and will report to Chris McGurk
and Adam Mizel.
Bill Sondheim added, “I am excited to be joining Cinedigm as the new
President of our combined entertainment operations. I have known Chris
for many years, having previously worked for him at Polygram
Entertainment, and look forward to growing Cinedigm’s entertainment
business with him and the entire Cinedigm team. Cinedigm’s
industry-leading digital platform, film releasing business and emerging
networks initiative, enhanced by GVE’s direct physical goods, digital
platform, retail relationships and brands, will make CEG an even more
powerful and unique competitor in our evolving industry.”
Second Half Fiscal 2014 Outlook
The combined company is expected to produce strong financial results
with Second Half Fiscal Year 2014 guidance of total consolidated
revenues at $84.0-$86.0 million and consolidated EBITDA of $41.0-$42.0
million. Total Second Half Fiscal Year 2014 non-deployment revenues are
forecast at $59.0-$61.0 million and EBITDA of $17.0-$18.0 million. Total
Second Half Fiscal Year 2014 CEG revenues are forecast at $52.0-$54.0
million and EBITDA of $12.5-13.5 million.
Quarter 2 Fiscal 2014 Outlook
Cinedigm will announce Second Quarter Fiscal Year 2014 results in
mid-November and is providing preliminary financial results of
consolidated revenues of $22.0-$23.0 million and consolidated EBITDA of
$10.0-$11.0 million, as well as non-deployment revenues of $10.0-$11.0
million and EBITDA of ($1.0-$1.6) million. The Company experienced
continued growth even with timing delays in both DVD shipments and
subscription VOD revenue recognition reducing net revenue and EBITDA by
approximately $0.7M and $0.6M, respectively. CEG results also include
$1.4 million of pre-releasing expenses in the quarter from 8 theatrical
releases and $3 million year-to-date.
Investor Call
Cinedigm will host a conference call for investors tomorrow, Friday
October 18, 2013, at 10:30 am EDT. The live call will be available by
telephone by dialing 1-877-754-5303 for domestic callers or
1-678-894-3030 for international caller and entering conference call ID
88482352. The conference call and accompanying slides will also be
broadcast live over the Internet and can be accessed at http://www.media-server.com/m/p/8wje7qu2
or at Cinedigm’s website in the Investor Section under Events and
Presentations.
A telephonic replay of the conference will be available beginning
October 18, 2013, at 1:30 p.m. EDT, through October 25, 2013, at 11:59
p.m. EDT. To access the replay, dial (855) 859-2056 (U.S.), and use
passcode 88482352. International callers should dial (404) 537-3406 and
enter the same conference ID number.
ABOUT CINEDIGM:
Over the past decade, Cinedigm has led the digital distribution
revolution that continues to transform the media landscape. In addition
to its pioneering role in transitioning movie theatres from traditional
film prints to digital distribution, Cinedigm continues to advance
worldwide cinema modernization with its suite of software products
allowing exhibitors and distributors to manage their newly digital
businesses with efficiency, insight and certainty. And, as the leading
distributor of independent content in the world, Cinedigm collaborates
with producers and the exhibition community with unequalled transparency
to market, source, curate and distribute quality content across all
digital platforms to targeted and profitable audiences. The company’s
library of over 5,000 titles includes award-winning documentaries from
Docurama Films®, next-gen indies from Flatiron Film Company® and
acclaimed independent films and festival picks through partnerships with
the Sundance Institute and Tribeca Film. Cinedigm is proud to distribute
many Oscar®-nominated films including THE INVISIBLE WAR, HELL AND BACK
AGAIN, GASLAND, WASTE LAND and PARADISE LOST 3: PURGATORY.
Current and upcoming CEG releases include Destin Daniel Cretton’s SHORT
TERM 12, Godfrey Reggio’s VISITORS, Penny Lane’s OUR NIXON and Shaul
Schwarz’s NARCO CULTURA.
Cinedigm™ and Cinedigm Digital Cinema Corp™ are trademarks of Cinedigm
Digital Cinema Corp www.cinedigm.com.
[CIDM-E]
ABOUT GAIAM, INC.’S ENTERTAINMENT UNIT (KNOWN AS GVE)
Gaiam, Inc.’s entertainment unit, GVE, is a leading producer,
distributor and marketer of entertainment media. With content focused on
entertainment programming, GVE provides sales, marketing and
distribution services to many of the home entertainment industry's most
prestigious brands, including Discovery Communications, Hallmark
Channel, NFL Films, National Geographic, Marvel Animation, Shout
Factory, Televisa, and World Wrestling Entertainment.
Copyright Business Wire 2013