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Koch Sold to Canadian Firm

10 May, 2005 By: Jessica Wolf

Canadian wholesaler ROW Entertainment Income Fund is broadening its reach into the U.S. market with its purchase of Koch Entertainment for nearly $80 million, it was announced today.

ROW will pay Koch Entertainment founder and CEO Michael Koch $20 million of ROW Entertainment Fund Units (2.4 million shares at $10.54 each), $55 million of cash and assume $5 million in liabilities.

CEO Koch will remain in his position and will be a major shareholder in the merged company. He has signed a three-year employment contract.

Koch Entertainment is the largest independent video and audio distributor in the United States. Under its umbrella are the company's official distribution arm Koch Entertainment Distribution; the indie CD label, Koch Records; video company Koch Vision; and Koch Lorber, a joint feature-film venture with Richard Lorber, who will remain an investor in the new company structure.

Everything remains fairly business-as-usual for Koch Entertainment under the purchase agreement, said Michael Rosenberg, president of Koch Entertainment Distribution and Koch Vision.

Rosenberg will retain his position, as will Bob Frank, president of Koch Records; Alan Grunblatt, EVP of Koch Records; and Dominique Zgarka, president of Koch Entertainment Canada.

All Koch staff will remain in place, and releases will still carry Koch logos, Rosenberg said. Koch Distribution will still act as the U.S. distributor for company product. The deal is expected to be final June 1, according to the companies.

“Now we can look at acquiring other companies in the United States,” Rosenberg said.The biggest changes are likely to come on the Canadian side of the business, he said. Koch has always had a Canadian distribution arm, which may partner on exclusives in the future with ROW's distribution business.

ROW Entertainment last year purchased Canadian wholesaler Video One to become the largest distributor in Canada. The company also owns a chain of 102 audio/video stores across Canada, CDPlus and Internet seller CDPlus.com. It was ROW that initiated the deal with Koch, Rosenberg said.

“ROW wanted to start building something in the United States, and this is the first step,” he said. “They're a successful company that operates profitably. We're sitting here as an independent profitable company, and they saw a good fit.”

According to ROW, combined pro forma revenue for the two companies would have been $563 million last year.

“The acquisition of Koch will enhance our position as one of the leading suppliers of home entertainment in Canada and now the U.S. market, one of the largest globally,” said ROW president and CEO Darren Throop.

Throop also sits on the board of the National Association of Video Distributors.

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