Film Department raising funds through IPO
Amid all the bad news for the indie film biz, there might be at least one new U.S. distributor on the hunt for product at next month’s Cannes Film Festival.
Mark Gill and Neil Sacker’s Film Department reportedly is on course to complete its initial public offering by the end of April, raising the funds it needs to expand into distribution.
Without the additional financing, the struggling production and international sales company could have to limit or discontinue its operations, according to documents filed Tuesday with the Securities and Exchange Commission.
Film Department is looking to raise north of $64 million through the IPO, with net proceeds of roughly $54 million. That’s less than the company initially sought when it registered for the IPO in December.
In Tuesday’s amended filing, the Film Department lowered the price of its expected public offering from between $12 and $14 per share to between $10 and $12 per share.
Share prices often fluctuate during an IPO process. Sometimes, fluctuations can signal lukewarm interest among investors. Film Department had hoped to complete the IPO in March, joining a very short list of standalone studios or production companies that are publicly traded, i.e., Lionsgate and DreamWorks Animation.
Company also upped the number of common shares it will issue, from 4,615,385 to 5,454,545. Initially, it intended to issue more than 7 million shares of common stock; figure has changed several times.
SEC filing also disclosed that venture capitalist Mark Kvamme of Sequoia Capital has taken a minority investment in the Film Department and joined the board of directors. Sequoia, a relative newcomer to the film biz, has funded ventures including Apple, Google and Yahoo.
According the SEC docs, Kvamme will receive more than 60,000 shares in return for his stake.
A partner at Sequoia since 1999, Kvamme reps the firm’s investments in LinkedIn, FunnyorDie, Mark Logic, AdBrite and StrongMail. Prior to joining Sequoia, he was a founding member of Apple France.
Another carrot the Film Department is dangling in front of investors: Company says it’s in final negotiations with 20th Century Fox for a homevid distribution deal. It already has a pay TV deal setup with the Weinstein Co.
Film Department execs are barred from discussing the IPO by SEC rules. But several sources outside the company said that based on Tuesday’s filing, the IPO, being offered through Girard Securities, should close by the end of the month.
Company, launched in 2007 after raising $200 million in financing, has only had one box office release, “Law Abiding Citizen.” While a box office success, company has found itself mired down by debt payments. The Film Department posted a net loss of $10 million in 2009; $14.1 million in 2008, and $5.6 million in 2007.
By getting into distribution, Film Department hopes to fill a void in the marketplace and improve its balance sheet.
A dramatic number of indie distribs have closed shop in the last 24 months, including studio specialty labels Miramax, Picturehouse, Warner Pictures Independent (where Gill was prez) and Paramount Vantage, while Overture is up for sale. That’s made things tough for theatrical acquisition biz, particularly on the festival circuit.
If all goes according to plan, the Film Department intends to release six to 10 films a year, two to six of which will be acquired from third parties. It says it will keep marketing costs at $15 million to $25 million per film. The Film Department has 15 projects on its own development slate, including Kate Hudson starrer “Earthbound” and “The Rebound,” starring Catherine Zeta-Jones.
According to SEC filings, the Film Department will use $22.5 million of the net proceeds from the IPO to accelerate repayment of secondary debt and $1.25 million to pay down the production loan for “Earthbound.” In addition to the monies raised through the IPO, company expects to see another $34.4 million from “Law Abiding Citizen.”