MONTREAL — Troubled Canuck TV producer Cinar has finally been sold.
After more than two years seeking a suitor, Cinar announced late Thursday it has inked a deal to sell the Montreal-based company to an investor group made up of former Nelvana execs Michael Hirsh and Toper Taylor, and the private fund TD Capital.
The group has agreed to pay $143.9 million for the producer of kids hits like “Arthur” and “Caillou.” Nelvana and Cinar have long been Canada’s two leading animation companies.
Hirsh told Daily Variety that Cinar, which was a publicly traded firm, will become a private company following the sale, and the head office will be moved from Montreal to Toronto, where Hirsh lives.
“This is a terrific deal for shareholders,” Hirsh said. “It’s an all-cash offer and the shareholders have the possibility of enjoying the benefits of the resolution of the litigation. With its educational division and great characters like Caillou and Arthur, we can make Cinar into one of the outstanding companies for children’s entertainment in the world.”
The buyers already have crossed one significant hurdle in securing the support of Cinar co-founders Ronald Weinberg and Micheline Charest. The buyers have told Cinar that, under separate, concurrent agreements with the investor group, Weinberg and Charest — who hold approximately 96% of Cinar’s multiple voting shares — have agreed to vote their shares in favor of the sale.
The other shareholders will vote on the deal at a shareholders meeting in the coming weeks.
Approximately $1.2 million of the purchase price will be held in escrow pending resolution of a dispute with Charest and Weinberg regarding the validity of their exercise of 840,000 options. This dispute is being submitted to binding arbitration.
Cinar has been plagued by one scandal after another since 1999 when it was alleged the company had fraudulently obtained film tax credits. In 2000, it was discovered that $122 million in company cash had gone missing, invested in mysterious offshore funds. That led to the firing of Charest and Weinberg.
New management has been trying to sell the company ever since, but has been having great difficulty because of the legal clouds. There were many class-action lawsuits, several of which have been resolved.
The deal announced Thursday includes provisions to allow shareholders to benefit if the remainder of the offshore investment is ever recovered. There is roughly $45 million still unaccounted for.
“I think we have a deal that is very good for all shareholders,” said Cinar CEO Stuart Snyder, who said the sale took so long because “the nature of this company is very complex.
“There are litigation issues that add to the complexity. What’s very positive in the deal is that we’re providing for shareholders to receive funds from that litigation.”
Under the terms of the agreement, which were unanimously approved by Cinar’s board of directors, the investor group will acquire 100% of the outstanding variable multiple voting and limited voting shares of Cinar for $3.57 per share in cash or $3.60 should Cinar’s dispute regarding the founders’ options be settled in its favor.
Completion of the transaction is subject to, among other things, approval by the holders of two-thirds of the variable multiple voting shares and limited voting shares, with each class voting separately. It is also subject to court approval and requires regulatory approvals in Canada and the United States.