Lions Gate bids for Artisan by Richard Morgan
Updated 06:16 PM EST, Oct-10-2003
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Bidders for Artisan Entertainment Inc. crossed the finish line last week without a publicly designated winner but with plenty of smart money and Wall Street money still backing Lions Gate Entertainment Corp.
A source confirmed Friday, Oct. 10, that Lions Gate did make Artisan's Oct. 9 deadline for final and binding bids with an offer placed at or near $150 million plus the assumption of an estimated $85 million in debt.
Lions Gate was also said to have rounded up debt financing from J.P. Morgan Chase & Co.
The developments were not lost on close observers who, after concocting their own connect-the-dots scenarios, sent speculation of Lions Gate emerging as front-runner into overdrive. Never mind that Toronto-based Lions Gate's interest in Artisan, the Santa-Monica, Calif.-based studio behind indie blockbuster "The Blair Witch Project," has been known for years.
On Oct. 7, just two days before binding offers for Artisan were due to auction managers Allen & Co. and Harris Williams & Co., Lions Gate disclosed in a regulatory filing that "in the near future, we may make an offer to make this significant acquisition." Then, on the Thursday that the bids were due, Lions Gate priced a stock offering for 25 million additional common shares.
The per-share price of $2.70 for the offering lead-managed by SG Cowen Securities (Natexis Bleichroeder and Thomas Weisel Partners are serving as co-managers) promise to fatten Lions Gate coffers by $67.5 million in gross proceeds.
Some close to the auction considered the capital influx just enough — once coupled with the borrowing capacity permitted by the $100 million in cash and receivables Lions Gate reported for the most recent quarter — to emerge the winner.
That J.P. Morgan was identified as permitting the borrowing furthered notions of a Lions Gate success. The same bank, after all, had provided Artisan a $200 million credit line after the studio abandoned plans for an initial public offering in September 2001.
Almost as soon as its line was in place, and after rejecting a $250 million offer from USA Networks Inc. in 2000, Artisan first tested the waters about a sale. But nobody came near meeting its $300 million floor, thereby forcing another retreat.
Since then, Artisan has been whacking away at a debt load estimated to have been $270 million. Then, with debt reduced to a manageable $90 million in March, it conducted another auction that elicited more than 20 offers.
Of those offers, one submitted by former USA Films executive Scott Greenstein and backed by Thomas H. Lee & Co. was given serious consideration. Protracted maneuvering, however, eventually caused Artisan to abandon negotiations.
But that's not to say Greenstein has stayed away. On Oct. 10, the Hollywood Reporter maintained that Greenstein had teamed up with former Paramount Pictures chief Stanley Jaffe some weeks ago to offer between $140 million and $150 million, plus the assumption of debt, indicating a total not all that different from Lions Gate's.
John Josephson, a former Artisan director and the Allen & Co. managing director handling the auction, did not return calls for comment. Neither did Todd Morris, who was designated the auction's point man for Harris Williams.
Artisan also declined comment, as did Lions Gate.
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