Motion Picture Distribution, an income trust controlled by Toronto-based Alliance Atlantis, has initiated arbitration proceedings to try to resolve financial issues related to the 2004 acquisition of Spanish distrib Aurum Producionnes.
Alliance execs said the amounts being claimed represent a significant portion of the C$55 million ($47 million) purchase price, but the company would not provide an exact figure nor elaborate on the exact nature of the dispute.
The Canuck company is Canada’s leading film distributor and also releases pics in Spain and England.
It filed an amended and revised business acquisition report with Canadian regulators on Friday that related primarily to adjustments to the financial statements for Aurum for the two years preceding the acquisition.
Alliance execs said the financial statements were being adjusted to reflect liabilities and certain related-party transactions that were improperly accrued.
These issues were not discovered by the Canadian company during due diligence prior to the acquisition.
“If someone misrepresents what they’re showing you, it’s very difficult to detect it in due diligence,” said Andrew Akman, veepee of corporate development at Motion Picture Distribution.
But Akman said his company will definitely not abandon Aurum.
The Alliance Atlantis income trust has referred the dispute to the London Court of Intl. Arbitration, which is expected to rule on the case sometime this year.
The problems at Aurum come at a bad time for Motion Picture Distribution, which had a rough year as a result of box office woes in Canada, Spain and England. Revenue is down mainly due to the lack of blockbuster titles such as the “Lord of the Rings” pics, which had boosted the company’s numbers for the past few years.
But Akman is confident the income trust’s financial numbers to be released in February will be more upbeat thanks to the strong perf in Canada of such pics as French-language hockey drama “Maurice Richard” and “Brokeback Mountain.”