Toronto-based Alliance Atlantis Communications has announced itsintention to spin-off its Canadian and UK distribution businesses into a so-calledincome fund.
Through an initial public offering, the fund will indirectlyacquire a non-controlling interest in a new entity, Motion Picture DistributionLimited Partnership, which will then acquire the business conducted by AllianceAtlantis Motion Picture Distribution Group and Momentum Pictures. The companywill retain a majority interest in the partnership. According to a preliminaryreport from Reuters, the fund IPO could net the company up to $357m (C$500m).
In an analyst conference call last Tuesday, Alliance Atlantis CFOJudson Martin said the company had pondered spinning off some assets as aninvestment trust and using any new capital to relieve its debt. The company hada net debt of $481m (C$585m) at the end of its first quarter 2003.
With fiscal 2003 revenues of C$324.6m, AAC is Canada's largestdistributor, both in number of releases and theatrical box office receipts,thanks to its multi-year sub-distribution pacts with US companies Artisan, NewLine, Miramax and Focus. Canadian releases scheduled for 2004 include TheLord of the Rings: The Return of the King, Spy Kids 3-D: Game Over, Quentin Tarantino's Kill Bill, starring Uma Thurman and Lucy Liu, andAnthony Minghella's Cold Mountain, starring Jude Law, Nicole Kidman and Renee Zellweger.
As for UK distribution operation Momentum Pictures, the companyannounced in June that the UK operation generated C$75.4m, or 20% of the MotionPicture Group's fiscal 2003 EBITDA. A preliminary prospectus says the AAClibrary contains some 6,000 titles representing 14,000 hours of programmingrights. In each of the past three years AAC's Canadian distribution operationhas released an average of 80 theatrical motion pictures and grossed C$182.8m,some 20% of the C$918m market . In ancillary, the company released 188 videosand 206 DVDs.
Momentum, which was launched in 1997 and has been wholly-owned byAAC since 2001, released an average of 16 theatrical motion pictures, 40 videosand 37 DVDs in the UK.
An amended and restated preliminary prospectus will be issued onSeptember 23.