Iwerks Entertainment and Showscan Entertainment announced plans Tuesday to merge into the world’s largest provider of ride simulators and software, with more than 160 sites and nearly 70 titles.
In addition to motion simulation, the new entity will expand upon Iwerks’ recent forays into the giant-screen theater arena, according to William Battison, Iwerks exec VP. That market now is dominated by Imax Corp.
The deal, which is subject to shareholder approval, is expected to close in the fourth calendar quarter.
The merger will reduce overhead costs by eliminating duplicative efforts in administration, marketing and sales, according to Dennis Pope, Showscan president and CEO.
While acknowledging that some layoffs probably would result, Pope said it was “much too early to know” how many. Iwerks has about 75 full-time employees, while Showscan has about 40.
The company expects to see recurring film licensing revenues of approximately $12 million per year, based on the two companies’ fiscal 1997 results.
Pope said the combined library of 67 simulation ride titles, could open up new markets in smaller location-based entertainment sites appealing mainly to local residents.
“Once you get into areas where the percentage of tourist traffic is less, the owner-operator needs to change ride titles more often,” Pope said. “If you have ‘Devil’s Mine Ride’ one week and ‘Secrets of the Lost Temple’ the next, your repeat business will go up.”
Iwerks faces stiffer competition in the large-screen area. The company has installed just four 1570 large-format systems — similar to the Imax system — including one at Ontario Mills. Iwerks has sold an additional 64 units of its smaller, more economical 870 system, which appeals mainly to museums and science centers.
The 30-year-old Imax outfit has installed more than 150 permanent large-screen theaters in 22 countries, and expects to install 55 more in the next few years. In recent months, Imax has announced the sale of 24 3-D theaters to five commercial exhibitors, including Regal, Edwards and Marcus.
And unlike Iwerks, Imax also is a producer and distributor of large-format movies.
“We have a well-recognized, world-class brand name and a history of technological and film achievement,” said Richard Gelfond, Imax vice chairman and co-CEO. “We are confident that customers will continue to recognize what it means to be part of the Imax network.”
The merger calls for each share of Showscan common stock to be converted into 0.85 of a share of Iwerks common stock.
Iwerks expects to issue approximately 5.62 million shares of common stock in the merger, resulting in an estimated transaction value of approximately $27.3 million. That figure is based on Monday’s closing price of $4.875 per share.
The deal will make Showscan a wholly owned subsidiary of Iwerks. Iwerks chairman and CEO Roy A. Wright will remain chairman and CEO of the combined company
Culver City-based Showscan was formed in 1984. The company has long-term, multitheater ride simulator agreements with United Artists Theater Circuit, Imagine Japan, Taiwan’s King’s Entertainment Co. and Australia’s Reality Cinemas.
Showscan also has an equity interest in simulation theaters at L.A.’s Universal Citywalk, London’s Trocadero and Osaka, Japan.
Founded in 1986, Burbank-based Iwerks has installed 270 attractions worldwide. Clients include Disney Theme Parks, Paramount Parks, Dave and Busters, Six Flags and Hoyts.