Peace Arch, ContentFilm DVD units to join

Parent companies nearly merged earlier this year

By Danny King -- Video Business, 6/24/2008

JUNE 24 | Peace Arch Entertainment’s U.S. home entertainment division and ContentFilm Plc’s Allumination FilmWorks unit will merge next month, four months after Toronto-based Peace Arch dropped its bid for U.K.-based ContentFilm. The transaction creates what the companies say will be one of the largest independent domestic DVD distributors, while further connecting Peace Arch acting CEO Jeff Sagansky with the company he sold to ContentFilm in 2006.

Peace Arch Entertainment’s DVD unit will manage the partnership, keep its name and have international distribution rights on theatrical titles, while ContentFilm will have overseas distribution rights on direct-to-DVD and TV titles, the companies said yesterday. The merger will save some operating costs.

Peace Arch Home Entertainment hasn't made any decisions regarding whether Allumination CEO Cheryl Freeman and her management staff will stay on with the new entity.

The transaction is consistent with Peace Arch Entertainment's new strategy to quadruple annual DVD releases to about 50 through acquisitions, while cutting back its production of straight-to-DVD titles to between three and six a year, from five to eight previously.

Berry Meyerowitz, who runs Peace Arch Home Entertainment, this month estimated that U.S. sales would double this year, though he declined to give a revenue forecast for the company. The unit doubled sales to C$22.2 million (US$21.8 million) while almost quadrupling operating profit last year.

“Our company’s recent expansion into the U.S. market has resulted in significant growth in our home entertainment business, and this merger further reinforces our commitment to increasing shareholder value,” said Meyerowitz in a statement yesterday.

The merger also reunites Sagansky with Allumination, formerly Ardustry, which he acquired with Kerry McCluggage in 2005 and sold a year later to ContentFilm. Sagansky, who has helped run companies such as CBS, Sony Entertainment and TriStar Pictures and remained a director at Allumination, was named Peace Arch’s interim CEO in November after former CEO Gary Howsam resigned because of a federal investigation into transactions involving Comerica Bank that took place before he joined Peace Arch.

Peace Arch said in December that it bid $35 million for U.K.-based ContentFilm but ended its exclusive period of negotiation three months later, with Sagansky citing “turmoil in the credit markets and market conditions in general.”

Allumination has distribution rights to almost 200 theatrical DVDs as well as more than 4,000 hours of TV content.

The companies didn’t disclose the merger’s financial consideration.