Film Department no longer going public

10:39 AM PST 08/04/2010 by Paul Bond, AP

Indie co. negotiating with private investors to raise $200 mil

The public markets being inhospitable, Mark Gill and Neil Sacker have decided to raise another $200 million privately for their company, the Film Department, and ditch plans for an initial public offering.

The duo also said Wednesday that the Film Department will distribute its own films in the U.S., with some assistance from the Weinstein Co., and that its second movie, a romantic comedy called "The Rebound," starring Catherine Zeta-Jones, will open Christmas Day on 2,000 screens.

Gill and Sacker had filed in December for an IPO that would have raised about $85 million with shares priced at $12-$14. After lowering their sights to raising closer to $60 million with shares at about $6, they decided to abandon the IPO altogether.

The movie veterans told The Hollywood Reporter that they expected to close a deal as early as this month -- but more likely in the fall -- that would give them access to $200 million via debt and equity from individual investors, banks, private equity firms and hedge funds. While they wouldn't name names, backers are likely to include at least a few previous investors.

When it's all said and done, Film Department employees will own roughly 15% of the company. There are 22 employees now, but those ranks will swell to 47 as the U.S. distribution arm ramps up.

After an IPO, CEO Gill and COO Sacker had been set to own 3.89% and 2.94% of the company, respectively. Those percentages, being negotiated now, aren't likely to change significantly.

The company also said Wednesday that, through the Weinstein Co., it reached a pay TV agreement with Showtime and that it has signed a U.S. home entertainment agreement with Fox.



Those relationships, in fact, brought renewed private-investment interest to the firm, as did a shoring up of its financial situation. Using money in part made from its first release, "Law Abiding Citizen," the company paid down $60 million in debt, leaving it with a more manageable $29 million debt.

The 3-year-old company made "Citizen" for $40 million, and the movie has earned $120 million so far, with releases in France, Italy and Japan yet to come. The film starred Jamie Foxx and was distributed in the U.S. by Overture Films.

Gill said his company is branching out into film distribution at a uniquely opportune time.

"Distribution has become the biggest bottleneck in the world," he said. "Movie ticket sales are up even in the recession, but the number of distributors has dropped dramatically and the number of films the big studios are releasing has dropped. Five or six years ago, they were releasing 250 a year, and last year it was 106."

The Film Department, created in 2007 with about $200 million from G.E. Capital, intends on making and distributing 2-4 films a year, budgeted up to about $45 million apiece, and acquiring a few more from third-party financiers.

After "The Rebound," it has "Earthbound," starring Kate Hudson, Whoopi Goldberg and Kathy Bates, and 11 more in development.

"The benefit of being private is you don't have a lot of reporting requirements, especially in the Enron age," Sacker said, noting that 130 U.S. companies have canceled plans for an IPO this year.

Nevertheless, being public would have given the company easier access to capital, but the execs said they're happy with the trade-off. "We're very, very hungry, we have a great group of people, we're humble about who we are, and we're easy to work with," Sacker said.
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