SYDNEY — Touted as the first takeover of a U.K. entertainment group by an Australian showbiz company, U.K. film and television producer-distribber Circle Communications is being acquired by Aussie film and TV producer-distribber Southern Star in a A$20 million ($15.6 million) deal.
Southern Star is buying the 56% controlling interest in Circle held by U.K. media company Moving Ventures Intl., which also owns Talk Radio U.K. and TV info service Teletext. More stakes are being acquired from Circle directors, while Southern Star is offering $1.17 per ordinary share (which is an 11% premium to their $1.05 price at May 13) to other stakeholders in a bid for more than 90% of Circle’s stock. Circle shareholders can take cash outright or a combination of cash and Southern Star shares.
Southern Star raised $48 million from an IPO and Australian Stock Exchange listing last September, bringing the debt-free company’s capitalization to about $125 million, and is funding the Circle acquisition from cash resources and new bank facilities. The acquisition adds Circle’s 1,000 hours of principally drama and wildlife programming to Star’s 2,350 library hours.
Eye on the U.K.
“We had our eye on three or four U.K. companies because we want to be able to access the U.K.’s 25% local content rules. It gets us into the European Union and allays our concerns about potential EU trade barriers,” says Southern Star exec chairman Neil Balnaves.
He said it was time to “internationalize the company,” whose growth in Oz was leveling out. “It gives us a chance to be positioned properly and substantially in Europe, which we have earmarked for significant expansion. More than half of Southern Star’s international sales revenues is currently derived from Europe.”
Circle comprises TV and theater drama producer Carnival, TV distribber Pavilion, film rights company Delta Ventures (which has rights to pics from Charlie Chaplin, Alfred Hitchcock and Richard Attenborough), film and TV producer Harlequin, wildlife producers Independent Wildlife and Oxford Scientific, and a co-venture with top drama writer Lynda LaPlante called LaPlante Intl. Circle, which posted pre-tax profit of about $1.1 million on turnover of $12.6 million last year, was said to be trading slightly behind forecasts and was ripe for takeover.
“Circle’s strategy has always been to build a broadly based rights group. The episodic nature of the business means that, without scale, a balanced earnings stream is hard to achieve,” admitted Circle chief exec Peter Clark. “The offer from Southern Star presents an opportunity to build shareholder value. The merged group has the potential to be a major player in the international rights business, particularly in Europe.”
“Circle, in the main, will continue as Circle but reporting to Southern Star. Where there is overlap, some resources may be combined,” Balnaves told Daily Variety, refusing to “rule in or out” staff layoffs, except to say, “We haven’t taken Circle on to carve it up, and it would be my intention that the company will run largely as it is and Peter Clark will remain as chief exec.”