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Cinram To Acquire Warner Music Group's Replication Ops

18 Jul, 2003 By: Holly J. Wagner

Toronto-based replicator Cinram International Inc. will acquire the Warner Music Group's DVD and CD manufacturing and physical distribution businesses from AOL Time Warner, along with some related businesses in the U.S. and Europe, in a deal valued at $1.05 billion in cash.

Cinram's stock was up nearly 25 percent in midday trading following the announcement.

The acquisition, which has been in the works for months and is subject to regulatory approvals and other customary closing conditions, is expected to close this fall.

As part of the transaction, Cinram will enter into exclusive long term agreements with Warner Home Video, Warner Music Group and New Line Cinema to manufacture, print, package and physically distribute their DVDs and CDs in North America and Europe, building on a relationship that stretches back two decades.

"This transaction affords us the opportunity to benefit even further from the dramatic worldwide growth in DVD sales,” said Isidore Philosophe, Cinram's founder and CEO. “We are extremely pleased to be acquiring these quality assets and to be entering into these long-term agreements with AOL Time Warner, with whom we have had a longstanding and excellent relationship. We are delighted to welcome these skilled and committed employees to our corporate family and are confident that they, together with our valued current employees and customers, will contribute to our growing status as a global leader in the optical disc industry."

Assets changing hands in the deal include manufacturing facilities in Olyphant, Penn., Commerce, Calif., and Alsdorf, Germany as well as related U.S. and European distribution facilities.

The acquired businesses also include Ivy Hill Corp., a provider of packaging and printing services for DVDs and CDs of AOL-affiliated companies and third parties; and Giant Merchandising, engaged in entertainment merchandising, retail licenses and private label marketing and distribution.

Cinram has secured committed financing aggregating $1.2 billion, which will be used to fund the acquisition and for other corporate purposes.

On a stand-alone basis, the acquired businesses would be expected to generate approximately $1.1 billion in revenue and $230 million in EBITDA for the fiscal year ended Nov. 30, after pro forma basis pricing reflected in the new supply and distribution agreements.

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