Artisan crafts plan for sale, nixes IPO

Lions Gate, WWF rumored to be potential suitors

Artisan Entertainment is officially for sale.

The film distributor and sometimes producer, best known for low-budget blockbuster “The Blair Witch Project,” formally pulled its initial public offering filing Wednesday and separately hired a pair of investment banks to review offers for the company.

Artisan had intended to go public after the fall release of “Book of Shadows: Blair Witch 2,” but moviegoers responded to the sequel with a collective “Blair Witch who?”

That disappointment, combined with rotten market conditions on Wall Street, had prompted the New York-based company to sit on its IPO plans for the past several months.

In the latest development, Artisan told the Securities and Exchange Commission it was withdrawing plans for an offering “because of unfavorable market conditions.”

But though Street conditions for new issues have indeed gone from bad to worse, there’s also been the feeling that Artisan has gone adrift after recent departures of top management. That’s led to rumors of talks with suitors including film distrib Lions Gate and even the World Wrestling Federation.

“They should attract buyers,” said analyst David Davis, senior veepee at Houlihan, Lokey, Howard & Zukin in Los Angeles. “A number of people have left, but there are still quality people at Artisan.”

In announcing the hiring of Merrill Lynch and Allen & Co. to review possible suitors for the company, CEO Amir Malin tacitly acknowledged talk of late that Artisan has been in negotiations with various prospective buyers.

“(We) have received a number of indications of interest regarding various strategic alternatives with the company,” Malin said in a statement. “Although we are very excited about continuing to build on Artisan’s many strengths, we believe it is appropriate to consider each inquiry from acquisition or merger partners.”

It’s believed talks with Lions Gate have stalled over price, and those with WWF have gone even colder over various issues. But MGM is considered another possible bidder for the library-rich distrib, and it’s known foreign-based entertainment investors also have been circling Artisan in recent months.

Sticker shock

Still, there’s broad sentiment that Malin and his board cling to an unrealistically high valuation for Artisan of $200 million to $250 million. A top exec at one company expected to bid on Artisan said an offer of about $150 million might be more realistic.

Though its film and TV library boasts an impressive 6,700 titles, big chunks comprise episodic fare and others involve telefilms and direct-to-video features.

Meanwhile, it’s believed rights on a good portion of the film library are short term only and will lapse in a few years, and rights on some other movie titles are limited to video and exclude TV distrib.

On the other hand, Artisan execs point to deals including a recent extension of an output pact with Showtime as evidence that its catalog holds lots of value (Daily Variety, March 14).

In any event, Artisan is increasingly viewed as primarily a library acquisition and that could be a problem in selling the company, suggested analyst Arthur Rockwell of Rockwell Capital Management in Los Angeles. “This company has had a few individual successes, but no one can really see where they’re going,” he said.

Since the tanking of Artisan’s “Blair Witch” sequel, distrib’s lone hit has come with specialty pic “Requiem for a Dream.” Current-running pic, which attracted an Oscar nom for topliner Ellen Burstyn, has taken in about $4.5 million in worldwide box office since its platformed release in the fourth quarter.

Investors interested

In addition to any expressions of interest from entertainment companies, financial-sector investors theoretically also could bid on Artisan. The company was founded by some former execs of Boston-based Bain Capital, who first acquired vid distrib Live Entertainment and built a theatrical-release company on that foundation.

Among entertainment companies, Lions Gate “is the only one with a recent appetite for acquiring film indies,” Rockwell said.

But a well-placed source said Lions Gate execs are determined not to overpay for Artisan after attracting criticism of that sort when acquiring smallish Trimark Pictures for more than $50 million last October.

It’s believed the Toronto-based distrib previously has offered to acquire Artisan in a mostly stock deal sweetened by some cash that Artisan still found wanting.

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