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Lions Gate, Artisan Merger a Done Deal

27 Oct, 2003 By: Holly J. Wagner

Lions Gate Entertainment today laid to rest speculation that it would acquire Artisan Entertainment, announcing a deal to buy the Blair Witch studio for $160 million in cash plus assumption of Artisan debt.

The transaction is subject to customary closing conditions, including antitrust regulatory approvals. The deal is expected to be completed by calendar year-end. Under the transaction, Artisan shareholders may receive additional cash based on the performance of certain films as well as other contingent compensation.

“Lions Gate and Artisan have complementary strengths and are a superb strategic fit,” said Lions Gate CEO Jon Feltheimer. “Together, the combined entity will be a powerful force in all aspects of filmed entertainment production and distribution, and will benefit from the largest library in the history of independent entertainment. [Artisan CEO] Amir [Malin] and his team have built a great company with a healthy balance sheet and a strong presence in motion pictures, home entertainment and family entertainment, providing us with great opportunities for achieving economies of scale and extending our brand equity. This transaction culminates the first phase of the business plan Michael Burns and I established, with our board, for our shareholders three and a half years ago.”

Artisan's library, considered one of its chief assets, includes independent breakout hit The Blair Witch Project, which remains one of the most profitable independent films ever made. The library includes more than 6,700 titles developed through original productions and acquisitions of libraries such as Republic Pictures, Vestron and Carolco; and production and distribution agreements with entities like comic powerhouse Marvel Entertainment and cable network Showtime Networks.

In addition to its film library, Artisan has also built one of the industry's most impressive family entertainment lines through its award-winning Family Home Entertainment (FHE) division. FHE currently distributes to the home entertainment marketplace product from some of the most prominent family brands. These include: Mattel Inc. (Barbie, Hot Wheels), Fisher-Price (Rescue Heroes), Scholastic Entertainment (Clifford the Big Red Dog), American Greetings (Care Bears), Nelvana (Miss Spider), TLC (Trading Spaces), Animal Planet (Crocodile Hunter), Big Idea! (Jonah: A Veggie Tales Movie) and Hallmark Home Entertainment.

“The goal set out by Ken Schapiro and myself, with the help of the senior management team, was to recreate and redefine the company, and maximize shareholder value. I believe that we have accomplished our mission,” said Artisan's Malin. “I can think of no company that better complements our core business strengths and strategic vision than Lions Gate. We anticipate fiscal 2003 (ending Dec. 31, 2003) to be the company's strongest year to date from a financial perspective. We enter 2004 with our strongest theatrical slate ever with franchise properties like Dirty Dancing: Havana Nights (co-produced with Miramax Films) and Marvel's incredible comic book legend The Punisher. Under Jon's leadership, I am confident that the new entity will be even greater than the sum of its parts.”

Earlier this month, Lions Gate.priced an offering of 25 million shares of its common stock at $2.70, in hopes of raising $67.5 million.

Lions Gate is known for hits like Monster's Ball, O, American Psycho, Shadow Of The Vampire, Gods And Monsters, Affliction and The Red Violin.

Fresh off the horror thriller Cabin Fever, Rob Zombie's cult favorite House Of 1,000 Corpses and the heist caper Confidence, the company is heading into the holiday season with three award contenders: Girl With A Pearl Earring, starring Scarlett Johansson in a breakthrough performance that galvanized this fall's Toronto Film Festival, Colin Firth and Tom Wilkinson; the Sundance acquisition The Cooler, starring William H. Macy, Maria Bello and Alec Baldwin; and a drama of journalistic fraud and deception Shattered Glass, starring Hayden Christensen, Chloe Sevigny, Peter Sarsgaard, Rosario Dawson and Hank Azaria.

Moving into 2004, the Lions Gate slate includes the cloning thriller Godsend, starring two-time Academy Award-winner Robert DeNiro, Greg Kinnear and Rebecca Romijn-Stamos, the futuristic The Final Cut, starring Robin Williams, Mira Sorvino and Jim Caviezel, the Cannes Film Festival sensation Dogville, starring Nicole Kidman, and the just-completed The Cookout with Queen Latifah.

The investment bank JP Morgan provided merger and acquisition advisory services to Lions Gate on the transaction, and Allen & Company and Harris Williams & Company advised Artisan. The law firms of Sheppard, Mullin, Richter & Hampton LLP and Heenan Blaikie LLP Toronto advised Lions Gate on the deal, and the Chicago office of Kirkland & Ellis counseled Artisan.

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