Cinedigm Set to Become Top Non-Theatrical Home Video Distributor With GVE Acquisition
UPDATED: The company is acquiring the home video business of Gaiam for $51.5 million.
In another major expansion, Cinedigm Corp. on Thursday announced the acquisition of the Gaiam, Inc. entertainment unit GVE, for $51.5 million. It will make the company the distributor of programming for the WWE, NFL, National Geographic, Discovery, the Jim Henson Company, and others.
GVE president Bill Sondheim becomes president of Cinedigm’s Entertainment Group, reporting to Cinedigm CEO Chris McGurk and COO/CFO Adam Mizel. According to McGurk, this acquisition will make the combined companies the largest U.S. distributor of non-theatrical home video.
"It's a giant transformative deal for us," McGurk told The Hollywood Reporter, adding: "Now we’ve got huge scale. That’s going to enable us to attract even more and better content. We already have the biggest library of video rights in the world. This can dramatically accelerate its size. I think at the end of the day because there’s still an arms race for content on digital platforms, the company that controls the most rights is going to be in the driver's seat and we're hoping that’s the position were going to be in now."
According to the announcement, this will increase Cinedigm’s annual retail sales to about $320 million annually. According to guidance provided with the announcement, that will add about $84 million in revenue in the next six months, which means on an annual basis Cinedigm revenues will rise to about $150 million, compared to the $88.1 million the public company reported in June.
GVE was the fourth largest independent distributor of non-theatrical home video product last year, with strong positions in children’s, family, comedy, and sports documentaries, among other programming.
Cinedigm said this will give them direct sales and marketing relationships with every major physical and digital distributor, including Wal-Mart, iTunes, and Amazon. The release said it will give them “the largest retail footprint of any independent studio distributor in the United States, with products sold through over 60,000 retail locations.”
It will also expand their library of digital distribution rights for independent films, TV series, and other content, including more than 32,000 titles and episodes. "We gave a tremendous amount of leverage in physical distribution, in digital, and we can distribute to theaters. We think this puts us in the driver's seat among all independents right now," McGurk said.
McGurk expects this to also accelerate Cinedigm's move into over the top channels like Docurama, a documentary service distributed on a paid YouTube channel.
Gaiam is retaining its health and fitness business, its e-commerce platform, and Gaiam TV, a streaming video subscription business. Gaiam said in its announcement that it will use the proceeds to pay down its existing credit facility.
In the two and a half years since McGurk took the helm of Cinedigm, he has completely transformed the company. When he arrived, it was primarily a company that did digital distribution of movie theaters. Today, most of the digital conversions are done, and Cinedigm provides maintenance services for a fee.
Its main businesses now have to do with distribution of content. It distributes specialty titles to movie theaters, both for traditional runs and for special event programs; it acquired New Video, which made it a big player in digital distribution; it spun off two non-core business; and now it has acquired a major physical distribution business in home entertainment."It's one-stop shopping," said McGurk. "And that’s what we love about this deal."
To finance the acquisition, Cinedigm announced it has a new $55 million credit facility from banks led by Societe Generale Corporation and Investment Banking. It also issued $3 million in restricted Cinedigm stock to Gaiam and $2 million in stock was purchased by an existing investor who wasn't named.
Cinedigm is also issuing $13 million in new stock with B Riley & Co. and National Securities Corp. The acquisition is expected to close Oct. 21.
Blackstone Advisory Partners acted as Cinedigm's financial advisor and Merriman Capital acted as advisor for the equity stock offering.
Cinedigm stock closed Thursday at $1.53 per share, down 3.77 percent from the prior day's closing.