Less than two months after losing out to Novia Scotia's Salter Street Films in a bid to launch Canada's first English-language movie network dedicated solely to independent filmmaking, Alliance Atlantis has offered some C$80m ($53m) to buy out Salter Street under an agreed takeover.
Since Alliance Atlantis already enjoys long-term output deals with numerous US suppliers of art-house product including Miramax Films, New Line Cinema, Fine Line Features, Artisan Entertainment, USA Films and Destination Films, the Salter Street purchase can be expected to accelerate plans for the autumn launch of Independent Film Channel Canada.
Last November, Canada's broadcast regulator granted one of its 21 most coveted digital television network licences to IFC Canada, a proposed specialty network to be jointly run by Halifax-based Salter Street, Toronto-based Triptych Media and New York's Independent Film Channel. That consortium beat out at least two other bidders: Alliance Atlantis and a joint proposal involving Astral Media and CanWest Global.
The change in control of IFC Canada is subject to approval by the Canadian Radio-television and Telecommunications Commission (CRTC). Once the greenlight has been given, Alliance Atlantis says it will maintain the film network's head office, as well as its marketing and programming activities, in Halifax. Michael Donovan, Salter Street's chairman and chief executive officer, will also serve as chairman of IFC Canada.
Both Michael and vice chairman Paul Donovan, who between them hold all the multiple voting shares of publicly-quoted Salter Street, have agreed to support the board-approved takeover along with certain other holders of subordinate voting shares. Alliance's offer of C$9.22 per share for the approximately 8.7 million shares outstanding represents a premium of nearly 40% over Salter Street's closing price last Friday.
Explaining his decision to sell his company to the country's dominant film & TV powerhouse after 22 years spent making films and TV programming on the independent fringes, chairman Donovan said he believed the "partnership with Alliance Atlantis is the best way going forward to continue to grow and develop Canadian films and television in Atlantic Canada. We also believe it is in the best interest of our shareholders."
The deal was not completely motivated by the upcoming movie channel. Even before proposing IFC Canada, Salter Street had gained the reputation as Canada's foremost television comedy producer, accumulating a library consisting of more than 1,100 hours of award-winning content. Among its shows are The Awful Truth, a series from maverick documentarian Michael Moore that is broadcast in the US on Bravo (the film and arts network affiliated with the IFC) and on Channel 4 in the UK.
"This transaction links perfectly with our strategy to diversify our television production slate. Over the past 18 months, we have added children's and fact-based documentary programming and now we are adding the comedy genre," noted Michael MacMillan, chairman and chief executive officer of Alliance Atlantis. "Additionally, we believe we will be able to effectively exploit Salter Street's extensive library with our existing global television distribution infrastructure."
The Canadian version of IFC is obliged as part of its newly granted licence to devote half its programming to Canadian content by the end of the initial seven-year licence period. The network was one of 16 English and five French-language "Category 1" licences awarded by the CRTC. These initial licences were particularly prized because they are guaranteed carriage as the country's cable operators begin to roll out the first stage of their digital services.
In order to maximise viewership and thus the likelihood of the new channels' survival, the CRTC requires cable distributors of digital programming services to carry all Category 1 licence-winners that are appropriate to their language market. The CRTC also provided genre protection: none of the new channel operators can directly compete with any other.
Even before their deal was announced on Monday, the two companies already have a long association with each other. Alliance Atlantis was a shareholder of Salter Street Films when Salter Street was a private company. Currently, Alliance Atlantis holds approximately 35,000 subordinate voting shares in Salter Street. MacMillan served as a Director of Salter Street until early 2000. And Salter Street Films was one of the original minority shareholders of Showcase, Alliance Atlantis' successful movie and drama specialty channel.