TORONTO — What began as a friendly arrangement for Paragon Entertainment Corp. to acquire control of Lacewood, an Ottawa-based animation company, has turned into a bitter power struggle. Lacewood has filed a C$9 million ($6.5 million) lawsuit alleging breach of a letter of intent that sets out the terms of the proposed reorganization.
Under the terms of a deal scheduled to close March 31, Paragon was to acquire 75% of the Lacewood group of companies and pump $1.8 million into working capital. Paragon currently owns 50% of a joint venture, Lacewood Animation Prods. Inc.
New entity planned
The deal involved a proposed reorganization that would put certain assets into a new company, Lacewood Prods. Intl. Inc., while some subsidiaries would be shut down.
Lacewood president Sheldon Wiseman said the deal called for Paragon to convert the $1.5 million in loans advanced to Lacewood over the last two years into equity and debt. Instead, Paragon demanded repayment.
Paragon sent in a receiver to take possession of the assets two weeks ago, and president Richard Borchiver says Paragon is prepared to operate Lacewood with or without Wiseman.
Wiseman has protected some of the Lacewood companies — each is separately incorporated — under Canada’s Bankruptcy Insolvency Act and is negotiating with other lenders to pay off Paragon’s loans.