NEW YORK — Just two months after approving a new business plan, Harvey Entertainment’s board decided to test the waters for a sale of the company by retaining Donaldson Lufkin & Jenrette as financial advisors.
DLJ’s brief is to advise Harvey on “a range of strategic alternatives intended to maximize shareholder value,” including “sale, merger consolidation … or spinoff of the business, securities or assets of the company,” Harvey said in a statement.
The announcement sent Harvey’s stock up 24% to $8.06 although investment bankers questioned whether DLJ would be able to find a buyer for Harvey, whose main asset is its library of classic cartoon characters led by Casper the ghost. At its current market price Harvey has a market worth of $37 million.
“How many times can you mine Casper?” said one Wall Streeter.
The hiring of DLJ seemed somewhat at odds with Harvey’s announcement in July that it had approved a three-year business plan devised by an interim management team brought in by the board in April to replace longtime CEO Jeff Montgomery, whose contract was not renewed.
The interim team, former All-American Communications CEO Tony Scotti and former MGM CFO Mike Hope, had proposed a business plan under which Harvey would produce up to 12 direct-to-video movies over the next three years and one new TV show a year.
In an SEC filing last month, Harvey said it was “currently in negotiations with several major media companies to secure both domestic and international distribution agreements for the new direct-to-video products.”
But Harvey has to raise new financing of at least $40 million, according to last month’s SEC filing, and install a permanent management team before it can implement the new plan. Hope and Scotti have a contract only until December.
The board’s efforts to hire new management are a little puzzling. Hope and Scotti were “unable to reach agreement” on terms under which they would per-manently run Harvey, Hope said Monday.
At the same time, the board did not want to hire an executive search team but “felt they could (find the new management) through relationships,” Hope said. None of the three directors — including investment bankers Michael Doherty and Allan Raphael, and Houston lawyer Gary Gray — could be reached for further comment.
Hope said DLJ’s work would “run in parallel” with the business plan outlined in July. “The board has decided to test the market and find out whether there are investors and/or other companies that would have an interest in executing this business plan” through acquisition or alliance, he added.
Hope said the possible sale of Harvey was one of the first issues considered when he and Scotti took over earlier this year but the two decided quickly to “focus on identifying those areas where (Harvey) could best exploit its intellectual property rights.”