Montreal: Remstar Corp. and Behaviour Communications have reached an agreement on Remstar’s acquisition of Behaviour Distribution, Behaviour’s domestic distribution arm.

Preliminary details of the transaction are as follows: Remstar acquires 100% of all issued and outstanding shares of Behaviour Distribution. There is a due diligence period, with a closing anticipated for June 28. On closing, Behaviour will receive a cash payment based on the book value, effective May 31, of its distribution assets, plus a premium.

Julien Remillard, Remstar cochair along with brother Maxime, says the company is actively evaluating Behaviour’s distribution assets, including the existing Malofilm/Behaviour library, which Remillard estimates to be in the 400-title range. Behaviour reported it has acquired about 50 movies in the past two years.

Remillard says no decision on the future of Behaviour staff will be made until the deal is sealed.

With this divestiture, and the earlier decision to reduce its activities in new media, Behaviour continues to revisit its operations and overhead spending practices, specifically high accounting and branding costs.

As part of the sale, Remstar has provided Behaviour with $3 million in the form of a convertible note. Behaviour says the convertible note may be repaid against a portion of the total selling price, converted into Behaviour class b subordinate voting shares at $0.39 a share or repaid by Behaviour at maturity on Dec. 31. Remstar or its acquisition financing affiliate also receives one million purchase warrants, allowing it to buy one million class b shares at $0.39 a share within two years of closing.

Brousseau’s condition

While jobs are a very real issue in Behaviour’s distribution divestiture, senior vp Pierre Brousseau’s situation is somewhat unique.

‘This is my statement and this is all I will be saying at the present time,’ says Brousseau. ‘I have a personal contract which runs to July 15, 2001 with Behaviour Communications endorsed by [company chairman] Richard Szalwinski and his private [holding] BHVR Communications, and I intend to fully follow the spirit and letter of that contract. Therefore, although the pipeline for payment has been through Behaviour Distribution, I am not personally concerned about the transfer of whatever assets from Behaviour to Remstar. I will continue to serve his majesty.’

Behaviour continues to have an active output agreement with Trimark, managed by Brad Pelman, vp video in Toronto.

About 30 full-time direct and indirect jobs, including eight in Toronto, depend on the company’s distribution activity.

At press time, two senior members of Behaviour Distribution staff are reported to have joined Pierre Latour of Montreal distrib Film Tonic.

Behaviour declared a $3-million loss related to the ‘accelerated write-downs’ in its Canadian distribution operations in ’98/99. Its Los Angeles-based presales and licensing distribution division, Behaviour Worldwide, headed by president Mark Damon, reported gross profits of $2.6 million during the last two quarters of ’98.

The distribution divestiture does not include Behaviour Worldwide or production unit Lux Films.

Remstar operations

Andrew Austin, former director of home entertainment at Odeon Films, heads up Remstar Distribution’s office in Toronto. He says Remstar plans to release 10 to 12 films in the English-Canadian market in 1999, including The Patriot, a $35-million picture directed by Dean Sernier, starring Steven Seagal and distributed by Buena Vista in the u.s.

Remstar has a first-look deal with Interlight Entertainment of l.a. picking up the $23-million Resurrection, starring Christopher Lambert and directed by Russell Mulcahy, and Camouflage, an $18-million picture from James Keach starring Leslie Nielsen.

Behaviour reported revenues of $13.4 million for the second quarter, down from $22.3 million for the same period last year. The net loss for the three months is $2.8 million or $0.05 per share compared to a loss of $2.1 million last year. The pretax operating loss is $2.1 million.

Revenue from filmed entertainment activities is $13.2 million, including $10.3 million from production and international licensing, primarily attributable to two feature films, Grizzly Falls and the sale of Eye of the Beholder.

Canadian distribution (Behaviour Distribution) generated $2.7 million, resulting in an operating loss of $155,000 in the quarter, while the digital studio (Behaviour Studio) generated revenues of $230,000, essentially from visual effects for Grizzly Falls. The division recorded an operating loss of $178,000.

The company’s new media division, mainly consisting of the interactive division, had revenues of $200,000 and a corresponding negative ebitda of $420,000.

One of the initial Behaviour Worldwide deliveries is Grizzly Falls, slated for a theatrical release this fall.

With a file from Cheryl Binning.