Montreal: Alliance Atlantis Vivafilm and Film Tonic have concluded a ‘strategic partnership,’ with all Tonic product henceforth to be distributed by Alliance Atlantis in all media.

The deal includes the theatrical release this fall of Louis Belanger’s Gaz Bar Blues and Lea Pool’s The Blue Butterfly, slated for a March ’04 release. Alliance Atlantis distrib unit Odeon Films will handle theatrical distribution in the English market. Gaz Bar Blues is produced by Coop Video de Montreal. Blue Butterfly, budgeted at $12 million, is a Galafilm coproduction with the U.K.

Tonic, which has a library of some 120 titles, almost all feature films, had been facing serious financial losses and had been on the auction block since last fall.

The distrib, established by industry veteran Pierre Latour in 1989, will remain in business, but operating overhead has been reduced to an absolute minimum. Essentially, all staff have been laid off except managing partner Joanne Senecal, who will operate out of a new office at the Ex-Centis production studios in Montreal.

‘It’s been very tough these past couple of years and we’ve been trying to find a way to survive,’ says Senecal.

Senecal says both merger and sale options were considered late last year, but the deal with Alliance Atlantis emerged as the best course of action. ‘They have all the windows,’ she says.

Montreal businessman Daniel Langlois (Media Principia, Ex-Centris), Latour and Senecal are the shareholders.

‘The entire situation will be revisited this fall, and hopefully we’ll be in a situation where we are available [to acquire] new Canadian films,’ adds Senecal.

No financial information on the deal was released, however, the ‘partnership’ is essentially a service arrangement between the two companies, with some cash advanced against future exploitation.

Vivafilm and Odeon will also distribute the Tonic feature Tiresia from director Bertrand Bonello, while Vivafilm will also handle Lars von Trier’s Dogville. Tonic picked up Quebec rights to Dogville two years ago, based on a script, says Senecal. Both films were entered in official competition at Cannes 2003. Luc Dery of Montreal’s Micro-Scope is the coproducer on Tiresia. Lions Gate Films holds all other North American rights to Dogville.

Tonic also holds the rights to the new Micheline Lanctot feature film Le Peige d’Issoudun.

Last year, AAC and Remstar Distribution entered a similar service arrangement.