LONDON — Filmgroup, the British video-on-demand company, has become the latest high-tech player to cancel its IPO because of adverse stock market conditions while Chello, the broadband ISP, has indefinitely delayed its IPO.
Filmgroup was hoping to raise around £75 million ($110 million) to fund the launch of its U.K. VOD service by the end of this year.
But chief exec Simon Franks insisted that these VOD plans remain firmly on track. He is now exploring alternative sources of finance and is already in negotiations with an unnamed telecom company to take an equity stake in the business.
Filmgroup was seeking to float 31% of its capital June 14 on the London Stock Exchange, which was expected to value the company at around $400 million.
But the decision to pull out was made late Tuesday, when it became clear the company was not even going to reach its minimum target capitalization of around $300 million.
Filmgroup has already acquired substantial packages of exclusive film product for its proposed VOD service, dubbed films2.com, from the likes of Germany’s Intertainment (repping titles from Franchise Pictures), Buena Vista Intl., Lakeshore, Seven Arts and BBC Films.
Intertainment had an option to take 20% of Filmgroup on flotation, in return for supplying its films. But Filmgroup will now have to pay the German company in cash for the $70 million deal.
Filmgroup’s biggest shareholder is Cliff Stanford’s Redbus Investments, with a 50% stake. Franks himself owns 29%. The company has no debt, and so is under no immediate pressure to refinance itself.
There was one piece of good news for Filmgroup. Its U.K. theatrical distribution arm, Redbus Film Distribution, has just opened its first major pic, the Brit comedy “Maybe Baby,” with unexpectedly strong results. It was the weekend’s highest opener, grossing $1.2 million on 280 screens, despite savage reviews.
Chello, parented by Amsterdam-based cabler United Pan-Europe Communications, was set to go public this week.
The delay comes at the same time that UPC is negotiating a linkup with Telewest — Britain’s No. 2 cable operator — a deal that would significantly extend Chello’s reach.
(Marlene Edmunds in Amsterdam contributed to this report.)