RNS Number : 2055X
DIC Entertainment Holdings, Inc.
20 June 2008
Not for release, publication or distribution, in whole or in part, in or into Canada, Australia, Republic of Ireland, South Africa or
Japan or, any other jurisdiction where to do so would be unlawful.
20 June 2008: For immediate release
FOR IMMEDIATE RELEASE
Recommended acquisition
by
Cookie Jar Entertainment Inc.
of
DIC Entertainment Holdings, Inc. (AIM: DEKE)
The boards of directors of Cookie Jar Entertainment Inc. ("Cookie Jar") and DIC Entertainment Holdings, Inc. ("DIC" or the "Company")
announced today that they have entered into an agreement and plan of merger (the "Merger Agreement") pursuant to which CJ Acquisition, Inc.,
a newly-incorporated subsidiary of Cookie Jar, will merge into DIC with DIC surviving the merger (the "Merger") and becoming a wholly-owned
subsidiary of Cookie Jar. The Merger will be effected pursuant to Delaware law. In the Merger, each issued and outstanding unit of DIC's
common stock (the "DIC Stock") will be converted into the right to receive US$0.7153 in cash (the "Per Share Merger Consideration") to be
paid following the successful closing of the Merger. The total transaction value is approximately US$87.6 million.
Commenting on the Merger, Andy Heyward, Chairman and CEO of DIC said:
"We are thrilled to be joining forces with Cookie Jar's highly respected team. Our two organizations are a perfect fit, with compelling
brands, strong licensing and merchandising capabilities and a commitment to quality programming that reflects the needs and aspirations of
children and families around the world. Following successful closing of the Merger, I look forward to working closely with Michael Hirsh and
Toper Taylor in bringing our two organizations together and charting our future growth."
Further commenting on the Merger, Jeffrey Edell, President and Chief Operating Officer of DIC said:
"This is a great opportunity for DIC. We are proud of the tremendous progress that DIC has experienced since flotation, with the
acquisition of the Copyright Promotions Licensing Group, our launch of KidsCo, the rapid expansion of our new media activities as well as
the development of our licensing business. The merger with Cookie Jar provides the combined company with an excellent platform for future
profitable growth."
1. Information on the Merger
The Merger is subject to the conditions and further terms set out in the Merger Agreement and will be made on the following basis:
for each issued and outstanding unit of DIC Stock US$0.7153 in cash
The Per Share Merger Consideration represents an approximate 45% premium to the closing price of DIC Stock on 19 June 2008 (being the
last date the DIC Stock was open to trading prior to this announcement) and results in total consideration payable in respect of DIC's
issued and outstanding common stock of approximately $30.96 million (or $31.5 million on a fully-diluted basis after taking into
consideration the units of DIC Stock issuable upon exercise of a Company outstanding warrant and units of DIC Stock payable to the former
Copyright Promotions Licensing Group ("CPLG") equity holders). Closing of the Merger is expected to occur in the third quarter of 2008 after
receipt of stockholder approval and any relevant regulatory approvals.
The total transaction value (which is approximately US$87.6 million) implies a total equity value on a fully-diluted basis of $31.5
million. The total transaction value includes assumed debt forecasted at the time of the transaction of $42.0 million and assumed fees and
expenses associated with the transaction of $14.1 million. Fees and expenses include $4.5 million in transaction bonuses payable to certain
of DIC's executives (before any required tax gross-up) pursuant to a plan adopted in October 2007, a $3.0 million fee, of which $250,000 has
been previously paid, payable to DIC's exclusive financial advisor, J.P. Morgan Securities Inc. (as assignee of the engagement letter
between Bear, Stearns & Co. Inc. and together with its affiliates, "JPMorgan"), and an estimated $6.6 million of other fees and one-time
costs associated with the Merger.
The Merger Agreement provides that, upon the terms and subject to the conditions of the Merger Agreement and following the closing of
the Merger, CJ Acquisition, Inc. will be merged with and into DIC, and the separate corporate existence of CJ Acquisition, Inc. will
thereupon cease, and DIC will be the surviving corporation of the Merger and a wholly-owned subsidiary of Cookie Jar. Andy Heyward will also
enter into a new employment and non-competition agreement with DIC, which will continue to exist as the surviving corporation effective upon
closing of the Merger.
Cookie Jar's obligation to consummate the Merger is conditional, among other factors, upon satisfaction of the following (unless
otherwise waived by Cookie Jar):
� approval of the Merger by the holders of a simple majority (50% plus one) of the issued and outstanding units of DIC Stock;
� the aggregate amount of common stock to which appraisal rights may be exercised, in respect of the Merger, under Delaware law not
exceeding 7% of the outstanding DIC Stock;
� each of the representations and warranties of the Company contained in the Merger Agreement that is qualified as to materiality or
as to a material adverse effect on the Company being true and correct, and each of the representations and warranties of the Company
contained in the Merger Agreement that are not so qualified being true and correct, except for such failures to be true and correct as would
not have a material adverse effect on the Company, in each case as of the date of the Merger Agreement and at consummation of the Merger;
� the Company having performed or complied in all material respects with all of its material covenants in the Merger Agreement on or
prior to closing of the Merger; and
� the Company shall have delivered to Cookie Jar the employment and related agreements, attached as an exhibit to the Merger
Agreement, to be effective upon closing of the Merger.
2. option and warrant holders
At present, all options to purchase DIC Stock have exercise prices greater that the Per Share Merger Consideration, and accordingly, no
payments will be made to the holders of options to purchase DIC Stock on account of such options.
Upon closing of the Merger, unless otherwise agreed, the warrant to purchase approximately 391,666 units of DIC Stock, held by Endeavor
Talent Agency, will be cancelled and replaced by a new warrant which shall grant the holder the right to receive, upon exercise, a cash
payment of approximately $0.2 million as set out in the Merger Agreement.
3. Background to and reasons for the merger
Background
In the summer of 2007 after consideration of a variety of factors, including but not limited to the future strategic direction of the
Company, the Company's financial performance, stock price, competitive conditions, current market conditions and potential synergies
available in the industry in which the Company operates, the Company's board of directors (the "Board of Directors") decided to explore
strategic transactions for the Company that would strengthen and complement the current business model going forward. After interviewing
several financial advisors, the Company retained Bear, Stearns & Co. Inc. (which subsequently assigned its rights and obligations to
JPMorgan) ("Bear Stearns") as its financial advisor. Bear Stearns commenced advising the Board of Directors concerning various strategic
alternatives available to the Company, and the Company formally engaged Bear Stearns as of 31 October 2007.
After consideration of these strategic alternatives, the Board of Directors requested that Bear Stearns assist it in preparing a
confidential information memorandum ("CIM") in preparation for a potential sale of the Company. The CIM was completed in January 2008 and
the Company and Bear Stearns approached multiple potential acquirers concerning a possible sale of the Company. As part of the sale process,
the Company and Bear Stearns conducted several rounds of bidding for the Company and evaluated the bids after each round.
After evaluating the bids received in the final round of bidding on 16 May 2008, the Company determined to negotiate exclusively with
Cookie Jar regarding a potential sale, and entered into an exclusivity agreement with Cookie Jar that expired on 5 June 2008. During that
period, and subsequently, the Company has negotiated the terms of the Merger Agreement with Cookie Jar.
On 13 June 2008, at a meeting of the Board of Directors, the Company's senior management, its financial advisor and legal counsel
presented to and discussed with the Board of Directors the terms of the Merger Agreement and the Stockholder Support Agreement (as defined
and explained below under the heading "Irrevocable Undertakings"). The Board of Directors, following this discussion, authorized the
Company's senior management and its advisors to continue negotiating with Cookie Jar in an attempt to finalize the terms of the proposed
merger. On 18 June 2008, the Company's senior management and its financial advisor and legal counsel presented the final terms, as well as
other details relating to the Merger and related transactions, of the Merger Agreement, the Merger, and the Stockholder Support Agreement at
a meeting of the Board of Directors, highlighting the developments since the previous board meeting. At that meeting, the Board of Directors
determined, after discussion and deliberation, that a merger with Cookie Jar on the terms presented is advisable and in the best interest of the Company's stockholders and approved and adopted the
Merger Agreement, the Merger and the Stockholder Support Agreement.
Reasons for the Merger
In determining that the Merger with Cookie Jar and the Merger Agreement are advisable and in the best interest of the Company's
stockholders, the Board of Directors consulted the Company's senior management, the Company's financial advisor and legal counsel and
considered a number of factors.
The factors supporting the Board of Directors' decision to approve and adopt the Merger Agreement and the Stockholder Support Agreement
and approve the Merger, include, but are not limited to, the following:
� the US$0.7153 Per Share Merger Consideration represents a premium of approximately 45% over the closing price of units of DIC Stock
on 19 June 2008 (being the last date the DIC Stock was open to trading prior to this announcement);
� the fact that after a competitive multi-round bid process, the Board of Directors believes that Cookie Jar's offer is the best
offer received by the Company in terms of total consideration, the length of time required to close and the certainty of closing;
� the belief by the Board of Directors that the Company negotiated the highest price per share that Cookie Jar was willing to pay,
taking into account the terms of the Merger Agreement, which was extensively negotiated between the parties;
� the Company's financial condition, historical results of operations and business and strategic objectives as well as the risk
involved in achieving those objectives; and
� the competitive landscape in the children's entertainment sector.
4. Information relating to Cookie Jar
Cookie Jar was founded in March 2004 by children's entertainment executives Michael Hirsh and Toper Taylor, who were joined later by
Chief Financial Officer Scott McCaw. Cookie Jar includes the brands Caillou, Arthur, The Doodlebops, Busytown Mysteries (Hurray For
Huckle!), Magi Nation and Johnny Test.
Cookie Jar develops, produces, distributes and markets quality products to children, their caregivers, parents and teachers. Cookie Jar
has produced 12 shows that air on numerous networks around the world, including PBS, The CW4Kids, Disney Channel, Channel 5, GMTV, Kids'
CBC, Teletoon, Cartoon Network, Jetix Europe, Super RTL and YTV.
Cookie Jar Entertainment has its headquarters in Toronto and has offices in Los Angeles, London, Paris and Tokyo.
5. information relating to dic
DIC, together with its subsidiaries (the "DIC Group") is a fully-integrated global brand management company dedicated to creating,
developing, producing, distributing, marketing and merchandising family-based intellectual properties.
The DIC Group serves as the worldwide licensor or agent for brands such as McDonald's, Strawberry Shortcake, Horseland, Mommy & Me, The
Beginner's Bible and Inspector Gadget.
The DIC Group has distinguished itself by building one of the largest libraries of animation worldwide with approximately 3,000
half-hours of programming including Inspector Gadget, Dino Squad, Strawberry Shortcake, Horseland, Sabrina, Liberty's Kids, Sonic The
Hedgehog and Care Bears.
In 2006, the DIC Group also acquired CPLG, a Pan-European licensing agency that represents the licensing rights of a broad portfolio of
world-renowned companies.
In 2006, the DIC Group and CBS launched a new educational and informational Saturday morning programming block, KEWLopolis on CBS. As a
pre-eminent supplier of kid's programming worldwide, the DIC Group has developed strategic partnerships with key broadcast partners
throughout North America, Europe, Asia, Latin America, Africa and Australia.
In 2007, the DIC Group acquired a one-third interest in KidsCo, an international children's television channel that currently has five
million subscribers. NBC-Universal and Corus Entertainment are also partners in KidsCo.
The Company is a Delaware corporation listed on the AIM market of the London Stock Exchange ("AIM") with operations in the US, UK,
France, Benelux, Germany, Spain, Italy and Portugal. It employs over 200 people and has its principal office in Burbank, California, US.
In the financial year ending 31 December 2007 the DIC Group incurred a net loss of $36.6 million as a result of its operations.
The DIC Group was founded in Paris in 1971 and was acquired by Andy Heyward, the Company's chairman and chief executive officer, in
1986. DIC Entertainment was later acquired by ABC/CapCities in 1993 and became a subsidiary of the Walt Disney Company in 1995. In 2000, Mr.
Heyward led the buyout of the business from Disney with Bain Capital. Mr. Heyward subsequently purchased Bain's interest in 2004. In October
2005, DIC listed on AIM in order to fund future growth and development.
6. Recommendation
The Board of Directors has unanimously approved and adopted the Merger, the Merger Agreement and the Stockholder Support Agreement and,
subject to its fiduciary duties, recommends that the Company's stockholders approve and adopt the Merger Agreement and approve the Merger.
7. Irrevocable undertakings
On June 19, 2008, Cookie Jar, in connection with entering into the Merger Agreement, entered into a Stockholder Support Agreement with
Mr. Heyward pursuant to which he irrevocably agreed, among other things, to vote the 21,598,696 units of DIC Stock (representing
approximately 49.9% of the DIC Stock issued and outstanding as of 19 June 2008) beneficially owned or controlled by him, in favor of the
adoption of the Merger Agreement and the approval of the Merger (the "Stockholder Support Agreement").
In connection with the Stockholder Support Agreement, Mr. Heyward also granted Cookie Jar a proxy to vote 14,028,159 of the units of DIC
Stock subject to the Stockholder Support Agreement in favor of the Merger and as otherwise provided in the Stockholder Support Agreement.
The Stockholder Support Agreement will terminate upon the earlier occurrence of, inter alia, successful closing of the Merger, payment of a
termination fee by DIC to Cookie Jar and certain other events further detailed in the Stockholder Support Agreement.
The Stockholder Support Agreement prevents Mr. Heyward from voting his DIC Stock in favor of any other competing offer for DIC or
transferring his DIC Stock unless any such DIC Stock transferred remains subject to the terms of the Stockholder Support Agreement. If the
Board of Directors changes its recommendation in favor of the Merger pursuant to the terms of the Merger Agreement, the number of units of
DIC Stock subject to the Stockholder Support Agreement will be reduced to an amount equal to 37% of the voting power of the outstanding DIC
Stock entitled to vote on the Merger, and the number of units of DIC Stock subject to the proxy will also be proportionally reduced.
8. TERMINATION; termination fee
The Merger Agreement may be terminated by the Company or Cookie Jar in certain circumstances, including if the Merger is not completed
on or before October 20, 2008 (subject to the Company's right to extend such date to November 18, 2008 under certain circumstances). The
Merger Agreement also provides for a termination fee of US$2.5 million (representing approximately 8% of the equity value of the Merger) to
be paid by DIC to Cookie Jar if the Merger Agreement is terminated in certain circumstances, which amount includes US$1.25 million as
reimbursement to Cookie Jar for its expenses incurred in connection with the transaction.
9. financing
The transaction is currently expected to close in the third quarter of 2008. Cookie Jar expects to finance the transaction through a
combination of equity, contributed by an investor group comprised of Birch Hill Equity Partners and OMERS Administration Corporation (the
pension fund for municipal employees in the Province of Ontario), and debt financing. However, Cookie Jar's obligation to complete the
Merger under the Merger Agreement is not conditional on its receipt of financing.
10. exemplary service payments
In connection with the Merger, DIC has agreed to make an exemplary service payment to each of Simon Olswang and Christopher McGurk, who
are both current independent non-executive directors of DIC, in the amount of $200,000 each (the "Exemplary Service Payments"). The
Exemplary Service Payments are being made to recognize the exemplary services of Mr. Olswang and Mr. McGurk during their time on the Board
of Directors and also to compensate them for the additional time and effort they each committed in excess of that which was contemplated by
their contractual arrangements with DIC. The payments are conditional upon closing of the Merger.
The Board of Directors has determined, after due and careful consideration, that the acceptance of the Exemplary Service Payments by
either of Mr. Olswang or Mr. McGurk does not and shall not fetter their exercise of their fiduciary duties to the Company. Furthermore, the
Board of Directors has determined, following consultation with their advisors, that such arrangements in themselves do not affect or alter
Mr. Olswang's or Mr. McGurk's independent status (as non-executive directors for instance), for the purposes of the UK Combined Code on
Corporate Governance.
11. Delisting
Application will be made to the London Stock Exchange plc for the DIC Stock to be cancelled, subject to closing of the Merger, from
admission to AIM on or following closing of the Merger.
12. FUrther information
The common stock of the Company is currently traded in certificated form on AIM.
The Company is incorporated in Delaware and, as such, is not subject to the provisions of the City Code on Takeovers and Mergers.
Where references are made to the Per Merger Share Consideration being at a premium to the current stock price, the premium has been
calculated by converting the current stock price, which is quoted in pounds Sterling, into US dollars using an exchange rate of �1:
US$1.972.
The Company confirms that as of 19 June 2008, it had 43,288,989 units of common stock, par value US$0.001 per share, issued and
outstanding and admitted to trading on AIM under the UK International Securities Identification Number USU252961011.
The Company expects to mail a notice of stockholders' meeting (which will confirm the date, time and location of the meeting) and proxy
statement related to the Merger within approximately 10 business days of this announcement.
For further information:
DIC Entertainment Holdings, Inc.
Jeffrey Edell, President, DIC
Tel:+1 818 955 5400
Nomad and Broker
Landsbanki Securities (UK) Limited
John Craven/Claes Spang
Tel: +44 (0) 20 7426 9000
Financial Adviser
J.P. Morgan Securities Inc.
Brian Marchiony
Tel: +1 212 270 2596
Media enquiries:
DIC Entertainment
Simon Forrest
+44 (0)7885 317746
sforrest@dicentertainment.com
Brunswick
+44 (0)207 404 5959
Tim Burt / Craig Breheny / Ash Spiegelberg
dicentertainment@brunswickgroup.com
Landsbanki Securities (UK) Limited, which is authorized and regulated in the UK by the Financial Services Authority, is acting
exclusively for DIC and for no-one else in connection with the Merger and will not be responsible to anyone other than DIC for providing
protections afforded to clients of Landsbanki Securities (UK) Limited.
J.P. Morgan Securities Inc. (as assignee of Bear, Stearns & Co. Inc.) is not regulated in the United Kingdom by the Financial Services
Authority, is acting for DIC and no one else in connection with the Merger and will not be responsible to anyone other than DIC for
providing the protections afforded to clients of JPMorgan or for providing advice in relation to the Merger.
Communications relating to the Merger will not be made, directly or indirectly, in or into, or by the use of the mails or any means of
instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facilities of
a national securities exchange of Canada, Republic of Ireland, South Africa, Australia or Japan. Accordingly, except as required by
applicable law, copies of this announcement are not being, and may not be, mailed or otherwise forwarded, distributed or sent in, into or
from Canada, Republic of Ireland, South Africa, Australia or Japan. Persons receiving this announcement (including without limitation
nominees, trustees or custodians) must not forward, distribute or send it into Canada, Republic of Ireland, South Africa, Australia or
Japan.
The availability of the Per Share Merger Consideration to DIC stockholders who are not resident in the United Kingdom or the United
States may be affected by the laws of the relevant jurisdictions. It is the responsibility of each DIC stockholder only to ensure that
receiving this announcement, the impending proxy statement, and any subsequent deliberations and actions (or non-actions) thereon is lawful.
DIC stockholders should seek their own professional advice in connection with the Merger.
This announcement does not constitute, or form any part of, any offer for, or solicitation of any offer for, securities (or any
recommendation in connection thereto). Any acceptance or other response to the Merger should be made on the basis of the information
contained in the proxy statement.
This document has been prepared by and is the sole responsibility of the Company and has not been approved by the UK Listing Authority
or AIM.
Forward-looking statements
This announcement contains certain forward-looking statements, including statements regarding the Company's plans, objectives and
expected performance. Such statements relate to events and depend on circumstances that will occur in the future and are subject to risks,
uncertainties and assumptions. There are a number of factors which could cause actual results and developments to differ materially from
those expressed or implied by such forward looking statemzents, including, among others litigation; the enactment of legislation or
regulation that may impose costs or restrict activities; the re-negotiation of contracts or licences; fluctuations in demand and pricing in
the entertainment industry; fluctuations in exchange controls; changes in government policy and taxation; industrial disputes; war and
terrorism. These forward-looking statements speak only as at the date of this document.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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