Winchester loading financier Cobalt

Payne to join board, Sadoff to ankle

Publicly traded Winchester Entertainment has agreed to buy Cobalt Pictures, the Los Angeles and London-based sales and financing company behind Disney’s “Open Range” and DreamWorks’ “The House of Sand and Fog.”

Cobalt’s London-based principal, Rodney Payne, will join the Winchester board. He will continue to run Cobalt as a film-financing label under the name Cobalt Media Capital.

Hal Sadoff, Cobalt’s Los Angeles partner, will ankle the company. Cobalt owners Alton Irby and John Muse will take a 20% stake in Winchester.

The deal reps a consolidation with an eye toward weathering the storms that have beset the foreign sales sector.

“This transaction will be a further step in building Winchester’s feature film business and will bring in two strong shareholders who are fully supportive of the company’s strategy,” said Winchester CEO Gary Smith.

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“We will add to our cash, strengthen our film library with more studio films and introduce an experienced and highly skilled film financing and sales capability.”

Winchester will pay for the deal by issuing new shares to Irby and Muse in two stages. The duo will get a 10% stake on the deal’s completion, with the option to buy another 10% at a fixed price a year later.

At its current stock price, Winchester is effectively paying $470,000 for Cobalt, and assumes no outstanding liabilities.

Irby and Muse would have to pay $590,000 to exercise their warrants on the second set of shares.

Back to Cobalt’s roots

Payne’s unit will be run with a view toward providing financing not only for Winchester pics, but also for projects with other sales companies.

That is how Cobalt first operated when it launched four years ago under the name MM Media Capital Partners, before it set up its own sales operation.

“We have had a longstanding relationship with Winchester,” said Irby. “Our last collaboration was on ‘Heartbreakers,’ which proved a great financial success for both Winchester and Cobalt. We look forward to more success in the future.”

Cobalt’s current slate also includes Richard Donner’s Paramount pic “Timeline.” Previous titles include “Swimfan” and “Danny Deckchair.”

Irby and Muse previously invested their own equity in most Cobalt movies and will consider such deals for upcoming projects with Winchester.

“We have done that in the past, and there’s no reason why we won’t continue to do so in the future,” Irby said.

He emphasized that he and Muse intend to be long-term investors in Winchester.

Winchester’s slate includes the Klasky Csupo pic “The Way the Dead Love,” Aussie comedy “The Night They Called It a Day” and a movie version of the cult Brit TV series “Red Dwarf.” It has a development deal with the Donners’ Co.

The stock market reacted positively to news of the Cobalt acquisition, pushing Winchester’s share price up 15% to $0.25 and raising its market capitalization to $6.7 million. The company estimates its net asset value at $33 million.