It was a perfectly scripted Hollywood ending – two of Canada’s most storied film distributors merging just hours before stars and media from around the world descended on Toronto for the country’s world-famous film festival.
The companies – Entertainment One and Alliance Films – are among the biggest players at the Toronto International Film Festival. Between them they have 29 films showing during the festival’s 11 days, along with all of the mandatory partying and schmoozing that comes with each premiere.
One of Alliance’s films – a movie called Looper that features Bruce Willis travelling back in time to assassinate his younger self – opened the festival Thursday night.
“We absolutely didn’t plan it this way,” said Entertainment One chief executive Darren Throop, sitting in the boardroom of a fancy Toronto hotel during a brief pause in his festival obligations.
But after eight months of on-again off-again negotiations that involved several interested companies, nobody wanted to risk postponing the news once both sides agreed to terms on the $174-million deal, announced Friday, that will create a company with a library of some 23,000 films.
“Our teams are completely consumed with the festival,” he said. “I’m talking sleeping-in-their-offices-every-night kind of busy. And this isn’t the kind of news you want lost in the festival, we’re creating a significant Canadian media company.”
The deal makes Toronto-based Entertainment One the largest independent distributors of both film and television properties in Canada and the United Kingdom. Its market share will be so great in Canada – a little more than 20 per cent – that the deal will require approval from Canada’s Competition Bureau before it can proceed.
“We believe the deal creates an exciting and substantial global content exploitation business that should continue to grow strongly over the medium term, driven by consumer appetite for quality film and TV content,” analyst Patrick Yau at Peel Hunt wrote in a note to clients.
Distributors have been under pressure as the DVD market shrinks thanks to the collapse of the retail rental market and online piracy. But the digital world provides an opportunity for smaller players to get their movies into the hands of consumers via services such as Netflix and through video-on-demand services.
“Our cost of delivery is lower and there’s no replication or trucks needed,” said Mr. Throop. “The issue we have to deal with is the conversion from a physical format to digital delivery via cable or iTunes or whatever comes next.”
The deal caps a tumultuous time for Alliance Films, which has rights to 11,000 blockbusters such as Pulp Fiction, The King’s Speech and The Hunger Games.
Its parent company Alliance Atlantis Communications was acquired by Goldman Sachs Group Inc. and CanWest Global Communications Corp. in 2007, but was orphaned when Goldman sold the partnership’s broadcasting properties to Shaw Communications Inc. following Canwest’s bankruptcy.
Since then it has been held by Goldman, who made it clear to chief executive officer Victor Loewy that it had no intention of running the company forever. Alliance was put on the block in late December.
“For Goldman this part of the business was just a small part of a transaction and we were just a necessary evil,” Mr. Loewy said. “Once they sold the broadcast assets, it was only a matter of days before they said they would exit this country. It’s a big relief for us.”
It is also the end of the line for Investissement Québec, the province’s investment arm which bought a 38.5 per cent stake in Alliance Films in 2008 in its bid to consolidate Montreal’s cinematographic industry.
At the time, the city was reeling from the desertion of big American studios. As part of the deal, Alliance moved its headquarters from Toronto to Montreal, the city where Mr. Loewy emigrated at 18 from his native Romania.
The executives said they haven’t yet determined the management structure or any other details of how the companies would operate once merged. But regardless of what comes next, Mr. Throop said his plans include Montreal.
“We plan on having significant infrastructure in Quebec forever,” he said.
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