Montreal: Distressed securities specialist Chapman Capital L.L.C. of Los Angeles has acquired close to one million Class B shares of Cinar at US$2.34 a share. The investment gives the U.S. securities specialist an estimated 2% of the 41 million Cinar shares issued and outstanding. Robert L. Chapman Jr., managing member, known in the U.S. investment community as a ‘corporate raider’ and ‘stock activist,’ says the ‘strategic block’ of shares will be used ‘to pressure Cinar management to get a deal done, and we’re going to see a very combative situation, a war over the money.’

Chapman is projecting an ultimate Cinar selling price ‘in the mid to high single-digit range’ per share. Or somewhere between US$200 million ($313 million) and US$360 million ($564 million).

He places a high value on Cinar’s education division, eight to 12 times the US$10 million in last year’s EBITDA, buoyed by 20% annual top-line growth. He says the multiple-stream Teletoon specialty franchise (in which Cinar owns 20%) could be the real prize, worth as much as US$30 million.

A Montreal analyst who asked not to be named says the current market multiples for the education division are likely to be lower, in the five to seven times range, and the total value of assets may be closer to the low end cited by Chapman, in the neighborhood of $300 million.

A source at Cinar says Chapman ‘will be given the same information as any other investor, but he seems to think he’s managing the company.’

To maximize shareholder value and manage any undue leverage by a maze of plaintiffs suing Cinar, Chapman says he’ll push hard for ‘an orderly sale of assets’ and the subsequent creation of a ‘cash pool’ before any settlement with plaintiffs and pay-out to shareholders.

Following settlements with tax authorities and Telefilm Canada, and the full repayment of bank debt, the ‘big wrinkle’ in this scenario, says the analyst, is that the cost of the settlement with plaintiffs could wipe out a big share of asset sale proceeds.

‘That’s the risk, but it’s not likely,’ says Chapman.

In other news, Cinar announced it has paid off all of its bank debt, US$26 million.

The company also announced BBC and Nickelodeon in the U.K., ZDF in Germany, Mediaset in Italy, HMG in Benelux and YTV and Radio-Canada in Canada are among prebuyers for 26 new episodes of Mona the Vampire. A Canadian merchandizing rollout for Mona launches this fall, including Scholastic books, stationery, backpacks, dolls and puzzles, and a YTV-Post Cereal promotion.

The Cinar Europe office in London, Eng. reports the series Are You Afraid of the Dark? (91 episodes) has been sold to Antenna 3 in Spain while the Cartoon Network of Japan has made an initial commitment to air 26 episodes of The Little Lulu Show.

In a recent report, Cinar stated it has rights to a 2,074 half-hour program library, a 20% interest in Teletoon, and operates a state-of-the-art production/post-production facility in Montreal. Unaudited top-line revenues for the 12-month period ending Nov. 30, 2000 were $153.1 million. The report also states shareholders’ equity (41 million shares outstanding and issued) is valued at $320 million.

-www.cinar.com