First Look gets a Nu Image
Stake in studio, output arm sold offNu Image principals Avi Lerner, Danny Dimbort and Trevor Short said Wednesday that their film company has acquired a controlling 52% financial stake in First Look Studios, including its theatrical distribution arm First Look Pictures. The deal was in the $65 million-$75 million range.
Short will step in as the acting CEO, running day-to-day operations as Nu Image decides on the direction of the company. The company interviewed a handful of potential CEO candidates this week.
The deal between the two Los Angeles-based companies, brokered by William Morris Independent, will add a hefty amount of new capital to FLS and restructure debt the company acquired since it was formed in July 2005 (HR 3/20). The studio obtained a three-year, $80 million credit line from Merrill Lynch in the summer after receiving $20 million in initial funding from Prentice Capital Management.
In a twist, the deal arose out of former CEO Henry Winterstern's aborted effort to persuade his fellow board members Chris Cooney, Mitch Goldstein and Chas Phillips to buy Nu Image's 300-title library. Nu Image wanted about $300 million, but Winterstern wanted to pay closer to $100 million.
The companies couldn't agree on terms, and FLS was said to be vulnerable because of overspending in the face of low revenue. Lerner saw an opportunity to buy FLS for the right price, according to sources close to the deal.
"When we heard that we were going to have a deal with them, we laughed," Lerner said at the time of Winterstern's departure, adding that he had been talking with several companies about the sale of his film library.
Nu Image is said to be open to outside investors who would beef up the company and back its expansion plans. The company raised capital for the FLS deal based on its earnings and the value of its library and existing assets. One insider described the deal as a "big risk" for Nu Image.
A spokesperson said there are no imminent layoffs planned, but a company source said there might be operational layoffs in departments like accounting as Nu Image merges its staff of about 65 people with FLS' staff of 130-plus. Three FLS employees were laid off last week.
The move gives Nu Image and its production/distribution arm Millennium Films an added outlet for home video and theatrical distribution, a move the company said will lead to a ramping up of FLS as opposed to shutting it down or selling it. Nu Image traditionally has looked to the big studios to distribute its films, but now it can add in-house distribution, providing First Look Pictures with bigger-budgeted titles than it has released in the past.
Nu Image still plans to keep lower-budgeted films in the mix, though FLS' theatrical division has faltered with its initial low-budget releases. First Look Pictures will continue to acquire and distribute films, while Nu Image will have control of the 700-title FLS library.
The move also should strengthen First Look's foreign sales of film and television product though Nu Image's sales arm. A source said that at the Festival de Cannes in May, First Look International president Stuart Ford will likely set up shop independently of Nu Image international sales head Dimbort, with the two operations merging after the fest.
First Look founding CEO Winterstern resigned from his post this month but stayed on as an adviser. He reacquired his Capital Entertainment Group, which he had merged with First Look in 2005. During his tenure, Winterstern purchased Blockbuster's production, acquisition and distribution arm DEJ Prods. for $25 million, video distributor Ventura Distribution for about $20 million and TV syndication packages from Pinnacle Entertainment.
Winterstern hired former Paramount Classics co-president Ruth Vitale about 17 months ago to run the domestic theatrical division of First Look. She resigned March 14 in what she called a "mutual decision" after the board of directors chose to move away from film production (HR 3/15).
Ford, who joined the company from Miramax International, created overseas sales arm First Look International. The other new divisions Winterstern created were First Look Television, domestic home video distributor First Look Home Entertainment and branded entertainment arm First Look Media.
Nu Image formed Millennium Films in 1996 as its film production arm, focusing on high-budget features, and has produced more than 60 films.