Corus Entertainment has announced a $554 million cash and stock deal in which Corus, a Toronto-based media company, will pay $48 per multiple voting and subordinate voting share to buy cartoon heavyweight Nelvana. Because Corus already owns 675,000 subordinate voting shares of Nelvana, the ‘aggregate purchase price for the shares not already owned’ is about $540 million.

While Nelvana co-ceo Michael Hirsh says ‘Nelvana was not for sale’ before its negotiations with Corus, he notes the deal will allow the company further growth, especially in developing specialty channels with international appeal.

In the current convergence frenzy, both companies’ boards have approved the deal, which will see Nelvana join Corus’ growing empire of specialty tv channels, pay and conventional tv stations, and radio stations. Corus will use 60% cash and 40% Corus Class b non-voting shares to pay for the toonco – listed as Canada’s sixth largest indie production company in Playback’s 2000 listing, with nearly $82 million worth of production in 1999. Nelvana placed just behind rival animator Cinar, whose production volume was estimated by Playback and whose future is unclear as it works its way through various government investigations and shareholder-launched lawsuits.

Corus president and ceo John Cassaday says all three men who founded Nelvana in 1971, Hirsh, co-ceo Patrick Loubert and senior exec vp Clive Smith, will continue on at Nelvana with the same titles. Hirsh says all three are covered by three-year employment contracts. He also says Toper Taylor, president of Nelvana Communications – based in l.a. – will stay on under a pre-existing contract. Senior executives at major Nelvana subsidiaries, such as Kids Can Press and book publisher Klutz, will also remain. Cassaday says he doesn’t expect any general layoffs at either company.

With 23 series, including 10 new ones, airing on u.s. broadcast or cable channels this fall, Nelvana is, according to Hirsh, America’s single largest supplier of toons for kids and adults, larger even than Disney.

In the Nelvana package, Corus acquires some 1,650 library episodes by the end of 2000, plus eight feature films, ongoing production rights to the majority of Nelvana’s series, exploitation rights to characters such as Babar, Franklin, Pippi Longstocking, Rupert and Donkey Kong, and a 20% stake in bilingual Canuck specialtycaster Teletoon. The latter could spell potential trouble for Corus since the crtc must give its blessing every time a single owner acquires more than 10% holding in a cable channel. Nelvana’s 20% of Teletoon, coupled with Corus’ 20%, would bring Corus to 40%. Cassaday says if the purchase deal goes through, the Nelvana portion would be placed in trusteeship pending crtc approval.

Multiple shareholders of Nelvana, representing 65% of the votes and about 16% of the total shares, have ‘irrevocably’ tendered their shares. The deal is contingent on 100% of mvs being tendered plus at least 66.7% of svs. Corus says by mid-October it will mail the offer to shareholders, who then have 21 days to tender; closing is expected mid-November.

At press time, Sept. 27, Nelvana shares were trading on the tse at $46.90, up $2.60 since the the day of the takeover announcement (Sept. 18).

Corus shares were trading on the tse at $46.90, up $6.65 from Sept. 18. *

-www.corusent.com

-www.nelvana.com