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Image Sold for $132 Million

30 Mar, 2007 By: Erik Gruenwedel

Image Entertainment has entered into a definitive agreement with BTP Acquisition Co. LLC, an investor group led by film financier and producer David Bergstein, to sell Image for $95 million in cash, including assumption of a $9 million replication advance from Sonopress LLC, and the repayment of about $24 million of debt.

The total deal is valued at $132 million.

Under the terms of the deal, Image stockholders will receive $4.40 per share in cash.

Chatsworth, Calif.-based Image, which holds a 3,000 title catalog, last year rejected three separate $4 per share offers from its second largest shareholder Lionsgate, which holds 18.7% of the distributor's outstanding common stock.

A Lionsgate spokesperson declined comment on the deal.

About 38% of Image's common stockholders have agreed to vote in favor of the transaction, according to Image.

The distributor's board unanimously approved the merger and has recommended Image stockholders vote in favor of the deal.

Completion of the acquisition, which must also obtain regulatory approval, is expected to close by July 31.

Bergstein, who recently purchased U.K.-based Capitol Films, an international film distributor, and Thinkfilm, a North American film distributor, is expected to continue operations of the company, including retaining management.

"Image's executive management team has built a first-rate company, and we are pleased to be able to provide a strong cash price to the Image stockholders and maintain Image as the leading independent home entertainment distributor," said Bergstein.

Image COO David Borshell, who said he expects the company's management to meet with Bergstein next week to discus its structure going forward, said Image affords Bergstein distribution at big box retailers.

"[Bergstein] appreciates we've been together for 17 years and can help him create his vision for Image," said Borshell.

Recently hired chief marketing officer Jeff Fink, who has a one-year contract, is expected to stay with the company.

Analyst David Miller with Sanders Morris Harris in Los Angeles, said the transaction should play out nicely for Lionsgate and its 4 million Image shares.

He said the Santa Monica, Calif.-based mini-major could throw a wrench in the works by initiating a higher bid, not necessarily to acquire Image, but to "extract" more value out of Bergstein.

"We are not getting that body language out of [Lionsgate]," said Miller, in a research note. "Instead, we are being led to believe, at least at this point, that Lionsgate will vote its shares in favor of the deal."

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