German production and distribution group Helkon Media has bought a 51% stake in UK distributor Redbus Films Distribution (RFD) as part of its plan to build a pan-European studio akin to PolyGram Filmed Entertainment.
The RFD acquisition is immediately expected to help Helkon cement its growing alliance of European distributors, which already includes Italy's Eagle Pictures and Spain's Tri Films. And it paves the way for RFD to move into continental Europe.
"The UK is a particularly difficult market to enter," said Helkon's investor relations chief Anusch Assodollahi. "We are convinced that we have the right partner in Redbus, which is a strong group, very aggressive and has many staff from PolyGram." Helkon and RFD began co-operation earlier this year when they launched a joint acquisition strategy.
"Having achieved our primary aim of establishing RFD as a major player in the UK film industry, we can now with Helkon focus on being a major player in Europe," said RFD co-founder, Simon Franks. "We want to build in Europe the kind of studio that PolyGram once was."
RFD is headed by Franks and Zygi Kamasa, founder of distributor Quantum Entertainment. They remain the company's largest private shareholders and will respectively become CEO and head of acquisitions. The terms of the all-cash deal were not disclosed, but the acquisition is understood to be accompanied by an injection "in the tens of millions of pounds" for RFD to invest in acquisitions. The deal already guarantees RFD all films flowing from the Helkon International Pictures arm including John McTiernan's $80m Rollerball.
The deal changes previous plans for the flotation of Filmgroup, an entity which covers RFD and nascent video-on-demand (VoD) supplier Films2. In May Filmgroup had attempted to float on the London Stock Exchange with a value of $380m (£260m). But the flotation was cancelled due to generally difficult market conditions for media stocks and investor wariness towards Filmgroup. Franks said that RFD and Filmgroup will now be run "at arms length" from each other. An announcement about further management changes and flotation plans for the remainder of Filmgroup is expected in the next few weeks.
"We are looking to buy on a pan-European basis. Studios are happy to sell pan-European rights. From our point of view this reduces competition. There are only two or three companies buying pan-European, compared with seven or eight just for the UK," said Franks. Assodollahi said: "By having more territories in the group it helps us to acquire more A-titles. This approach makes us independent of the German market and its 'crazy money'," a reference to the spiralling prices paid for rights by German distributors
Assodollahi said that the alliance could soon be expanded to other major territories, notably France, and that Helkon could be interested in equity stakes in other partners. "We cannot rule out closer links with these companies," he said.
Helkon said that it expects RFD to release 20-25 films a year in the UK and in the current financial year to end of July 2001 to contribute revenues of $17.9m (DM40m) and earnings before interest and tax (EBIT) of $2.7m (DM6m). For 2001-2002 it projects revenues of $27.7m (DM62m) and EBIT of $4.2m (DM9.5m) and for 2002-2003 is forecasting $34.4m (DM77m) and $5.4m (DM12m) respectively.
The company's 23-picture release slate this year includes a trio of films from Buena Vista Film Sales - Sandra Bullock-starrer Gun Shy, Play It To The Bone with Antonio Banderas and The Gift with Keanu Reeves - as well as Renny Harlin's $80m Driven and 3000 Miles To Graceland, starring Kurt Russell and Kevin Costner.
Income from VoD is understood to be a very minor part of Helkon's calculations. "We are content providers. But if we have people with good technology then that opens up new possibilities too," said Assodollahi.
In the months following Filmgroup's failed flotation it had discussions with another German group, Intertainment, concerning an option to sell 20% of the group. Filmgroup has a contract to buy UK VoD rights to a slate of films from Intertainment.