Company files for a public stock offering
The Film Department wants to jump into the domestic distribution business, taking a significant gamble by launching a public stock offering that could raise more than $100 million.
To help get the distribution operation off the ground, the 2-year-old indie, run by Mark Gill and Neil Sacker, will hire former Paramount marketing prexy Gerry Rich as its vice chairman overseeing marketing and distribution, starting in March — if the offering goes through.
Though the shingle so far has released only one film, “Law Abiding Citizen,” execs feel there is an opportunity in the market despite the difficult indie-biz climate.
The company announced Monday that it had filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of 7.08 million shares of common stock priced at $12-$14 a share.
The Film Department, which would trade on the Nasdaq under the TFD symbol, said it plans to build a U.S. theatrical-releasing operation to distribute six to 10 films per year. The company raised $200 million in financing when it opened for business in summer 2007 with a focus on production, international sales and financing and a goal of putting out up to six commercial, star-driven titles per year with budgets between $10 million and $45 million.
But that plan has been hampered by a downturn in the biz, rising costs and the disruptions from the WGA strike and the threatened SAG strike. The Film Department has a few more projects on tap: Catherine Zeta-Jones starrer “The Rebound” is targeted for a spring release; Kate Hudson vehicle “Earthbound” is set to start production in January; and “The Beautiful and the Damned,” a drama focused on F. Scott and Zelda Fitzgerald, is in pre-production.
In the prospectus for the proposed offering, the company said it’s shown an ability to develop a slate of 20 commercial projects — films worthy of a nationwide release — despite the tough times for showbiz, noting that box office is up 8% this year.
“The result is what management believes to be a rare opportunity: Consumer demand is up even as supply is dramatically down,” the prospectus said. “Consequently, TFD believes it will be even better able to attract well-recognized, high-quality talent.”
The company spent $7.8 million on overhead and development costs through Sept. 30, $8 million last year, and $3.6 million in 2007 “with no meaningful proceeds” from its first two films. The Film Department posted a net loss of $14.2 million through Sept. 30, 35.4% wider than the $10.5 million loss it posted in the same period a year ago.
TFD noted that it had paid Overture more than $14 million in distribution fees to cover “Law Abiding Citizen,” which grossed more than $70 million domestically, and asserted it could have seen significant additional revenues had it self-distributed the thriller.
The Film Department also said in the filing that it won’t pay dividends on the stock for the “foreseeable future” and that it plans raise an additional $157.5 million in new debt to fund marketing and distribution for future films.
At the time of its launch, the Film Department’s equity investors included Sheikh Waleed Al Ibrahim, Zeid Masri of SilverHaze Partners, Michael Singer, GE, CRG Movie Partners, Mark Esses, David Larcher, Michael Goguen, Richard Landry, Michael Reilly and Rafael Fogel.
Investors listed in the prospectus include H&W Movie Partners, Dubai-based Sandeman and private equity firm SilverHaze Partners. The underwriter for the offering is IPO Solutions, a division of Girard Securities.
Gill told Daily Variety three months ago that he was recapitalizing the startup and putting together an inhouse U.S. distrib operation — partly due to the inability to find the right theatrical deal for “The Rebound” (Daily Variety, Sept. 3).