British-based hedge fund manager Marwyn Investment Management LLP said Wednesday it has struck a $120-million deal to buy all the units of Entertainment One Income Fund.
Entertainment One owns Canada's largest wholesale distributor of DVDs, CDs and video games; music retailer CD Plus and Koch Records, the largest independent record label in the United States.
Under the terms of the complex transaction, unitholders will receive about $3.60 per unit. That represents a 33-per-cent premium over the closing price of the units of Entertainment One on Tuesday.
The complex transaction is subject to certain conditions, including approval by holders of 67 per cent of the units, and a simple majority of votes cast other than by senior management.
Marwyn said it plans to set up a company called Earl Street Capital Ltd. to buy the operating business of Entertainment One for $188-million, including net debt of $68-million.
Earl Street, which will trade on the Alternative Investment Market of the London Stock Exchange, will raise the cash for the acquisition through an equity offering, Marwyn said in a statement.
A special committee of the trustees of Entertainment One was formed last October to examine strategic alternatives after getting an unsolicited offer that came from Marwyn, sources said yesterday.
Genuity Capital, financial adviser to Entertainment One, has recommended that unitholders vote in favour of the deal. The transaction is expected to close by late March.
Forty-eight per cent of the unitholders have agreed to vote in favour of the transaction. They include Clarke Inc., Standard Broadcasting Corp., Trapeze Capital Corp., Trapeze Asset Management Inc., and a corporation owned by the founders of Entertainment One, including chief executive officer Darren Throop.
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