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No deal for DHX

A proposed merger between a Halifax film company and a multinational entertainment giant collapses. What does it all mean for local business?



“We’ve all been dealing with a lot of heartache and hardship in the last 18 months, which everybody’s tried to downplay,” says Kris Gilbert. “People are losing their homes and losing their cars and losing all over the place in town, but that’s a bad news story and nobody wants to tell it.” Gilbert, manager at William F. White’s equipment house for film, television and theatre, is watching the effects of global economic meltdown trickle into Halifax’s entertainment industry, but despite her concerns, she says she’s “guardedly optimistic” about the future.Still, last week’s collapse of a deal between the Canadian firm DHX Media---which consists of Halifax Film and Toronto’s Decode Entertainment---and international giant Entertainment One raises questions about the health of the local film industry.Under the terms of the $68 million agreement, signed in September, Entertainment One was to buy DHX stock at $1.59 per share. But by December, DHX was trading at less than half that price, and Entertainment One’s lender, JP Morgan Chase and Co., declined to finance the deal.David Regan, DHX’s vice president of corporate development, says that during a recession “it’s tough to use your shares as currency,” because they’re undervalued. But DHX is rolling with the punches, and the party line seems to be “it was a bad deal anyway, and we’re better off without those guys.”Perhaps they are.Entertainment One is a privately owned company with a hedge fund in the United Kingdom, and its parent company in the Cayman Islands, a well-known holiday destination for tax evasion. Since it was created in 2007, the multinational whale has gobbled up industry minnows Seville, Contender, Navarre, Paradox and Blueprint Entertainment, RCV Entertainment BV, Barna-Alper Productions Inc., Oasis Pictures Inc. and Maximum Film. Edward Peill, owner of Halifax independent film company Tell Tale Productions, found the idea of putting DHX under the “huge umbrella” that is Entertainment One unnerving. “If the parent company decided, ‘Oh we’re going to sell this thing off and we’re just going to kill it,’ that would have been a huge blow to the Canadian production industry,” he says. The short track record of Entertainment One makes it hard to predict what would have happened.Similarly, Christopher Zimmer, president of IMX Communications, sees it as positive that Halifax Film will remain local. “The company will remain owned and controlled by Nova Scotia investors and managers,” he says, rather than investors based primarily in Toronto and London. Even senior advisors, for whom the takeover would have been most lucrative, seem relieved to be retaining their autonomy. Had DHX merged with Entertainment One, says Regan, the company would have had a more “diluted” impact on Canada’s film industry. Then why did DHX want this deal so badly to begin with? While being small does provide the company with more control over product, smallness has its limitations. DHX lacks the ability to produce DVDs of its children’s shows, and Entertainment One would have helped with that, says Regan. “We have other options. We can partner with other companies (or) we can outsource that to a third party.” He adds that economic crisis is a “double- edged sword---the market’s down. That means some of our competitors are extraordinarily cheap also. So we’ll stay alert to deals.”He’s right to note that many local media outlets are not exactly at the top of their game. Layoffs hit Halifax at Global Television and CTV. There were also layoffs at Maritime post-production company, Power Post, though Rob Power, co-owner, says the layoffs are part of the cyclical nature of the film and television industry, not economic downturn. Despite less work and pending layoffs, industry people remain hopeful. “In recession times in entertainment, I’d suspect that you’d find that ticket sales are up,” says Zimmer. “Their trips to Mexico might be down, but people are still going to want to have some entertainment.”


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