Montreal: Coscient Group is engaged in fast-track talks aimed at a new public offering following its $20 million acquisition of Astral Communications’ distribution and program development divisions. Coscient chairman Yves Moquin says the company, listed on the Vancouver and Montreal Stock Exchanges, expects the acquisition to add $20 million to top-line revenues, targeted at $120 million in ’96/97. Its last public offering was in the spring of 1993.

In the deal, Coscient acquires Astral Distribution’s library, made up of over 10,000 titles from some 100 program suppliers including Twentieth Century Fox, Rysher, hbo, Showtime, Turner Home Entertainment and rko.

Of the $20 million paid by Coscient, a minimum of $8.25 million is cash, with the balance in cash and/or shares. The deal is subject to regulatory and board(s) approval and is expected to close by Nov. 29.

Astral senior vp Stephen Greenberg moves over as president of Coscient/Astral Distribution, the new distribution company whose activities include Allegro Films Distribution.

Roger Dent, director of research at Yorkton Securities in Toronto, sees the deal as ‘positive’ and says it ‘should work to the advantage of both Coscient and Astral.’

David McFadgen, an analyst with Marleau Lemire, Montreal, calls the sale ‘a nice fit’ for both parties.

He says the agreement opens up new relationships for Coscient in the u.s. ‘They’ll probably team up with Astral in the future in terms of Astral’s Canadian content obligations. Coscient will produce it and they line up a u.s. deal,’ he says.

Coscient may go to the Toronto Stock Exchange within the year, he adds.

‘The outlook for Coscient is favorable,’ says the analyst, ‘because year-end results are as expectedwith an expanded margin (better net profits) going forward.’

Coscient reported net earnings of $2.1 million or $0.18 a share for ’95/96 and is pointing to net profits of $3.7 million for ’96/97, plus earnings from the acquisition.

The company’s stock is trading in the $6 range, close to its 52-week high. It raised $7.5 million (at a reported $3 a share) this past summer through two private placements – $5 million with Caisse de Depot and $2.5 million with the Royal Bank.

McFadgen says Coscient’s ‘preliminary ’97’ stock target is $7 to $7.50. The company reported revenues of $83.8 million for the year ending July 31, with market capitalization at 14 million fully diluted shares, or $84 million.

Core business

The Oct. 22 deal signals that both Coscient and Astral will focus on core business activity as well as expand their mutually beneficial dealmaking.

Astral Communications has made an undisclosed minority investment in Coscient, says Stephen Greenberg, who’ll also sit on the Coscient board.

On his side, Ian Greenberg, Astral ceo, says the company will concentrate on its 12 wholly owned and/or shared network licences, in addition to videocassette wholesaling and technical services.

In the deal, Astral holds on to two content creators, Mediatoon, the transatlantic animation series packager jointly owned with Editions Dupuis, and Artech Digital Entertainments, the Ottawa-based multimedia and game producer.

Ian Greenberg says the sale won’t affect Astral earnings, but the new cash could bring about acquisitions.

Some of the investor sector commentators hope it might also improve the company’s disclosure policy.

Allegro Films president Tom Berry, the prime mover behind Coscient’s English-track production, specifically via theatrical distribution deals with Columbia TriStar and Triumph Films (Sony), says Astral decided to sell ‘to the right’ Quebec company.

‘In this business product is king,’ says Berry, adding new delivery systems are generating billion-dollar program deals. ‘But that does not mean that the delivery systems are going to make money. It does mean that people who own the product will definitely make money.’

Stephen Greenberg says Coscient is looking to rapidly expand. ‘They’re going to be a force to be reckoned with and I hope I can play a role,’ he says.

There will be ‘some fine-tuning’ at the former Astral Distribution office. It employs 40-plus people, mainly based in Toronto.

The biggest piece in the distribution mix is Fox/Astral, the long-term tv output agreement first signed by the late Harold Greenberg and Twentieth Century Fox in 1980.

Fox/Astral products include a slew of primetime winners – The Simpsons, The X-Files, NYPD Blue, Murder One, the new u.s. drama Public Morals and Chris Carter’s Millennium.

Other library highlights include the American Music Awards from Dick Clark Productions, Nash Bridges, the new Don Johnson tv series from Rysher, the rko classic film collection containing titles like Citizen Kane (which Coscient now owns outright in Canada), numerous tv movies from Showtime, and an eclectic program mix from Turner Home Entertainment, ranging from Ken Burns’ exquisite pbs doc series Baseball to wwf wrestling.

European elements include Eurimages, the Hamster Productions library, including the Navarro tv series, and the Canal+ and TF1 libraries.

The agreement also includes the wide-ranging Barney merchandizing and video franchise via Barney Home Video Canada and Lyons Group.

‘There are more than 10,000 titles and we had to count them all for this (deal),’ says Greenberg.

Some industry insiders estimate the $20 million sales price represents fair value for the acquired library alone.

‘All these agreements are going to come to us without problems and a certain number of them will be renewed for longer periods than initially indicated at the time of the transaction,’ says Moquin.

Moquin says the deal points to a closer relationship between Coscient and Astral, ‘creating more benefits, especially at the packaging level.’

The Coscient/Astral designation is an interim title intended to popularize the Coscient label in the u.s. industry. Permission to use the Astral name is extended to one year.

Folding Allegro Films Distribution into Coscient/Astral frees up Allegro’s specialized resources, adds Berry. Allegro distributes some eight to 10 theatrical films a year, 25 to 30 releases in home video.

Coscient Group came into its present form in the spring of ’94 with the acquisition of SDA Productions and Allegro Films. With its own production banner, Coscient, and the latest two – Cactus Animation headed by president Andre Belanger and Coscient Technologies Multimedia – the company is Quebec’s largest program producer/distributor.

The deal sets the stage for more international production and a higher level of program branding in distribution.

Moquin says margins will improve ‘because margins for exportable product are better than for domestic productyou can ask for better money.’

Berry says Coscient has a unique management structure.

‘Coscient is not run by a producer/founder, it has a more deliberate system of management by consensus than I think exists in other (production) companies,’ he says. ‘Often the bigger players in our industry are really sort of small companies on hormones, or small companies that have expanded rapidly.’

Coscient (the production entity) produces magazines, documentaries, variety and talk shows for the domestic market, and is now prepping international doc series for foreign sales and a talk show (Les Couches-tots) for the French and possibly the u.s. market

‘All of our divisions will be involved in international-type production,’ says Moquin.

SDA Productions

sda’s new president and gm Andre Picard says the company has two goals: to expand its international activity and develop ‘an identity as a content and trademark’ creator.

sda is talking coproduction with Takis Candilis, the new ceo at Hamster Productions. Candilis, a former Ellipse Films vp, signed a multiple program coproduction drama deal with sda this summer.

sda and Ellipse are coproducing four mows, including Bob Morane and Blake & Mortimer, and a 13-hour-plus tv movie special of xiii, which will broadcast on M6 in France. Shooting is planned for spring ’97, mainly in Quebec.

sda’s overall ’96/97 production investment is $25 million

In the 1980s, Picard spent over five years in Toronto with Telefilm Canada and Imax Corp. He says sda is looking forward to English production announcements and possible coventures with other Canadian companies.