into Salter,

Great North

Atlantis Communications is on a coast-to-coast shopping spree that has yielded, to date, minority investments in two production companies and the buyout of a post-production house. Minority investments are pending in two more production houses.

The deals are for a 5% share in Halifax-based Salter Street Films, a 20% share in Edmonton’s Great North Communications and a 100% acquisition of Toronto-based post house Soundmix.

Still to be finalized are a 14% investment in Credo Group of Winnipeg and another, possibly British Columbia-based, purchase.

The acquisitions (excluding Soundmix) represent a total investment of about $2 million – including the two unannounced deals – for the Toronto-based television producer and distributor.

The simultaneous announcements are no coincidence, says Kevin Shea, Atlantis coo. ‘We have been working on lining up the strategy for the last four or five months and we were hoping to announce a cross-Canada package.’

The minority investments are aimed at broadening Atlantis’ access to material for domestic and international distribution while giving the smaller companies access to private capital, says Shea.

‘We wanted to be in each region and these are the top production companies in their regions. We wanted to get to them before someone else did. This is a chapter out of broadcasting and out of cable that complements our ability to do business.’

The companies in which Atlantis has purchased a minority interest will continue to operate independently, says Shea, with the possibility that either an Atlantis principal or a regional member of the financial community will sit on the companies’ boards of directors.

Atlantis gains access, but no rights, to the companies’ existing libraries and is granted first right of refusal for world distribution rights on projects now in production and all future productions.

Atlantis’ investments are to be directed to a combination of coproductions and distribution. The money, says Shea ‘is to complement our ongoing production/distribution needs as well as theirs.’

The four investments are all quite similar in dollar terms, says Shea, but they are not necessarily similar in percentage terms because of the range in size of the companies involved.

While Atlantis will not be in a position to directly tap regional funds through the minority investment deals, both Salter Street and Great North will continue to access regional funds as before.

Salter Street has not coproduced with Atlantis to date, but Paul Donovan of Salter Street says the two companies are currently in serious discussions about developing some television projects.

According to Donovan, the deal with Atlantis was born on an airplane, when his brother and partner, Michael, sat beside Atlantis executive vice-president Peter Sussman on the way to the 1994 mip-tv market in Cannes. ‘When they landed, we had sold a piece of our company.’

Sounded good

Salter Street was not looking for investors, says Donovan, but the idea sounded good. ‘In some ways, it may seem competitive, but we are in different parts of the country. Atlantis has strong relationships with the u.s. and they have a lot of deals cooking. Maybe they can lay some of that off on us.’

Salter Street will remain completely independent in creative decisions, says Donovan, adding that the relationship is ‘more a goodwill kind of thing.’

Plans for the new money at Salter Street are to bolster tv production and to aid what Donovan calls the company’s ‘expansion mode’ (which includes the brand-new, New York-based Popcorn Channel and the opening of a foreign sales operation in England six months ago).

Donovan says the expansion also includes new staff and an ongoing search for new people in development and production in Canada, adding that he is on the verge of hiring an in-house legal counsel.

Salter Street’s current projects include the cbc comedy series This Hour Has 22 Minutes, as well as the Citytv series The Dark Zone, now in development. The company’s production budgets last fiscal year totaled between $5 million and $7 million, a figure Donovan says has been pretty steady over the last few years.

The investment in Great North developed indirectly through a 12-year relationship between Great North president Andy Thomson and Atlantis that resulted in such coproductions as the television series Destiny Ridge and the impending four-hour dramatic series, The Voyage of the Naparima, now in final draft.

Prior to the new deal, Atlantis was also a minority investor in Great North’s three-year-old distribution arm, Great North Releasing. Now, Atlantis holds 20% of Great North Communications, which comprises both the distribution and the production operations. Thomson says Great North Communications has recently gone from owning 0% to 100% of its distribution arm, which was formerly owned by minority shareholders. The cost of Great North’s corporate restructuring will be, in part, subsidized by the new capital injected by Atlantis.

The third and final component of Atlantis’ formal involvement with Great North is a long-standing output deal, whereby Atlantis handles Great North dramatic productions. Thomson says this will continue unchanged.

More attractive partner

Thomson does not foresee ‘necessarily more coproductions’ with Atlantis as a result of the investment, although he does say he hopes the deal will make Great North a more attractive coproduction partner for Atlantis ‘now that they will see a share of the bottom-line of the results.’

Atlantis will have no input in creative decisions, says Thomson, but he is hoping to get Atlantis ceo Michael MacMillan to sit on the company’s five-member board of directors.

In addition to paying off some of the restructuring costs, Thomson says the capital will help in adding new staff in key positions.

Two newcomers are Paul Black, formerly of International Image, who will be managing director of Great North Releasing, and independent producer Jill Sharp, who will work in documentaries as a staff producer (bringing the number of in-house producers up to three, not counting Thomson). Thomson says Great North is also adding executive assistants in every department.

May go public

While Thomson is not looking for other investors, he says he might consider taking the company public in a couple of years. In the meantime, he is going to keep an eye on developments at companies that have recently gone public, including Atlantis.

As for the status of Soundmix, Shea says management of the 17-year-old audio post-production facility will remain intact. The plan is ‘to turn what is now a cost center for Atlantis, given our hours of production through our own company, into a profit center.’

Shea adds some capital expenditure will be required to ‘turn (Soundmix) into a first-class Canadian operation to be used by us and others.’

The mixing/sound house was not in trouble, says Shea, the principals were looking to sell some – or all – of the equity. ‘They have been at it a long time,’ he adds.

The minority investment deals with Great North and Salter Street have closed, and the Soundmix deal is set to close shortly.

Alongside Atlantis’ acquisition news is word of the company’s second quarter results, which show an increase of 152% in revenue over the same period (ending June 30) in 1993. Revenues are at $22.9 million, net earnings – at $872,000 – are comparable with last year’s figures for the same period and earnings per share were 11 cents on 8,303,304 weighted average shares, compared to 15 cents on 5,804,000 for the same period in 1993. PC