Montreal: A new Toronto-based ‘edutainment’ company led by industry veterans Michael Hirsh and Toper Taylor, in partnership with TD Capital Canadian Private Equity Partners, have announced a deal to buy Cinar. The announced acquisition price is US$143.9 million and includes terms of settlement for outstanding litigation.

Cinar’s board of directors has unanimously approved the transaction, as have the company’s founders, Micheline Charest and Ron Weinberg, who together hold approximately 96% of the multiple-voting shares.

Hirsh expects the name of the new company and its senior management slate to be announced by the time the Cinar deal is closed, which should come late this year or early in 2004.

Hirsh says the new company is looking at other deals. As the Cinar purchase is brought to a formal conclusion, he says ‘due diligence’ is underway on other possible acquisitions, perhaps within a matter of months.

Hirsh says establishing a European office is desirable, but that proposal might only take form next year or the year after.

‘The vision [for the new company] is not far off from the old Cinar vision which we admired from afar,’ says Hirsh. ‘Together we are looking to build this new corporation and make it a leading player.’

RBC Royal Bank is the group’s senior lender. ‘With TD Capital and Royal Bank we have some very good partners,’ adds Hirsh.

Cinar reported top-line revenues of $143.5 million for the year ending Nov. 30, 2002. Earnings before interest and tax were $15.9 million and the company reported a net loss for the period of $6.5 million. About 85% of current earnings are from the education division.

Cinar’s education division, comprised of North Carolina-based Carson-Dellosa Publishing and HighReach Learning, are the leading independent suppliers in the U.S. supplement-educational publishing market.

Cinar also has a 20% stake in the highly successful Teletoon specialty channel. Corus Entertainment and Astral Media each hold a 40% share and Hirsh says he’s ‘looking forward to being back as a part of Teletoon and working with our partners at Corus and Astral.’

Closing the deal

Both classes of Cinar shareholders will vote on the deal following issuance of the proxy circular, but because of ‘the complexity of this company’s current litigation schedule’ it may take a little longer, says Hirsh. The hope is the vote and subsequent court approval issues will happen this year, although there is the possibility they may extend to early ’04.

‘We are hopeful that much of the litigation underway now will be settled before we come in. There is an incentive for shareholders for that to happen and we are confident that the current board is focused on achieving that,’ says Hirsh.

In 2000, it was revealed that US$122 million in company funds had been invested in hedge funds in the Bahamas without the knowledge of the board of directors. That touched off a series of crises at Cinar, culminating in the dismissal of Charest and Weinberg as co-CEOs.

Hirsh adds that his team will be meeting with Cinar management and ‘getting to know them better’ in order to make staff and management evaluations over the next few months.

In terms of new production at Cinar, Hirsh says it will take ‘possibly a few years’ to increase production and fully develop and finance new projects.

Playback recently reported that Cinar has not been investing significantly in new development. Instead, the company has taken a cautious, limited-exposure position in new projects, restricting its current role to minority coproducer/coventure and/or distributor in three or four new projects with American, Canadian, French, Swedish and German partners.

Cinar earlier reported that a dozen companies had expressed interest in buying the company.

Hirsh is one of the cofounders and a former CEO of Nelvana, which was acquired by Corus for $540 million three years ago. He left the company in late ’02.

Taylor was formerly president of international distribution, marketing and consumer products for Nelvana, and president of Nelvana Communications, its L.A.-based sales and development office.

‘We are happy to be working with Michael Hirsh and Toper Taylor, highly respected veterans of the entertainment industry, and believe that they have the requisite experience and skills to build on Cinar’s history and strengths. We’re also very excited about the potential for the company’s education business,’ says Joe Wiley, managing director, TD Capital Canadian Private Equity Partners.