Nelvana founder and former CEO Michael Hirsh and Nelvana’s former president of international distribution, marketing and consumer products, Toper Taylor, have teamed up with TD Capital Canadian Private Equity Partners to acquire all of the outstanding multiple and limited voting shares of CINAR Corp. for US$143.9 million in cash. CINAR’s Board of Directors unanimously approved the transaction, and the company’s founders, who together hold approximately 96% of the multiple voting shares, have agreed to vote their shares in favor of the sale.
Hirsh says he didn’t have his sights set on CINAR when he stepped down as CEO of Nelvana earlier this year. He tells Animation Magazine Online, "This is something that Toper and I decided to focus on after we left Nelvana and were looking for a way to re-launch ourselves into the sector. This was a very logical company for us to look at because its assets were very attractive." He cites CINAR’s supplementary educational publishing business comprised of Carson-Dellosa and HighReach Learning, both in North Carolina, as well as its 20% ownership of TELETOON in Canada and its animation production company and library in Montreal, which produces the popular animated shows as Caillou and Arthur and is in production on the upcoming Postcards From Buster, a new half-hour Arthur spin-off, slated for a fall 2004 debut on PBS.
Taylor notes, "We actually created a small list of interesting assets in the business that are for sale–some public, some private, some corporate, some properties, some libraries–and we then created a business plan and went out to seek equity partners. We’re very privileged to be in business with TD Capital in that regard. They agreed with our vision, supported us throughout this entire transaction and are putting up $144 million to purchase this company."
"That number also includes some senior debt from Royal Bank of Canada, so we have the two sources of funding," adds Hirsh.
CINAR will become private as a result of the transaction. Hirsh comments, "What we’re bringing is fresh capital to the table so that we’re going to be able to grow both the supplementary educational business with additional acquisitions and we’re going to be able to do the same thing for the entertainment area. We think we’re coming into the marketplace at a great time with new funding that will put us in a great position to make CINAR the leading player in the business."
Asked whether much of CINAR’s current management structure would remain in place, Hirsh says, "That’s a good question. It’s too early for us to say but there will certainly be many of the people who have been involved in the company in key positions. Clearly the educational division in North Carolina under the leadership of Steve and Patti Carson (Carson-Dellosa) and Mike and Sharon Mayberry (HighReach) will continue to play leading roles in the management of their companies.
Among CINAR’s other prospective buyers were several U.S. companies, and Hirsh says keeping control north of the border is key to the success of the company. He states, "I think that when you look at both TELETOON and the animation library and production arm, I think it was important that it stay Canadian, partly to preserve some of the assets the company had built up and partly to keep it all together. When you look at the combination of the supplementary educational business plus the Canadian parts of the business–production and television broadcasting–the whole really is greater than the sum of the parts and the company will be a much more important player being kept in its entirety rather than being splintered off through acquisition by a non-Canadian player."
Of the $143.9 million purchase price, approximately US$1.2 million will be held in escrow pending resolution of a dispute with the Company’s founders regarding the validity of their exercise of certain CINAR options.
A circular outlining the details of the proposed transaction will be mailed by CINAR to its shareholders shortly, and the deal is expected to close within 60 days, pending necessary shareholder and regulatory approvals.
RBC Capital Markets acted as advisor to the investor group, with debt financing to be provided by RBC Royal Bank Media & Entertainment Group (Toronto) and RBC Centura Knowledge Based Industries Group (North Carolina).