Cinram buys AOL Time Warner CD/DVD manufacturing and distribution for $1.05 billion
 

Breaking News from The Globe and Mail

Cinram buys AOL's DVD-CD unit


Friday, July 18, 2003

Cinram International Inc. said Friday it is buying AOL Time Warner Inc.'s CD-DVD manufacturing and distribution business for $1.05-billion (U.S.) while signing a long-term deal with the New York-based media giant.

With the move, Toronto-based Cinram, already a leader in DVD and CD manufacturing, will swallow a businesses that towers over its own revenue and profit performance. It also scoops up another major customer Warner Bros., adding to its already swelling lineup.

In early trading, its shares shot up 24.6 per cent to a new 52-week high of $21.25 (Canadian).

Cinram says it will have an exclusive long-term deal with AOL-owned Warner Home Video, Warner Music Group and New Line cinema. Cinram will manufacture and distribute DVD and CD titles in North America and Europe.

The businesses are expected to generate $1.1-billion (U.S.) in annual revenue and $230-million in earnings before interest, taxes, depreciation and amortization for the year ended November, 2003.

In comparison, Cinram reported annual 2002 revenue of $878.6-million (Canadian) and earnings before items of $78.5-million. The new company would have 2003 revenue of $2.33-billion on EBITDA of $479-million, Cinram said in a conference call Friday.

"This transaction affords us the opportunity to benefit even further from the dramatic worldwide growth in DVD sales," Isidore Philosophe, Cinram's CEO, said.

In a call with analysts, the company said the combined business will boost its DVD capacity to 1 billion units. Cinram says first-quarter sales of DVDs rose 62 per cent from a year ago.

It said the acquisition would be "significantly accretive" to earnings growth with pro forma EPS forecasts to grow 31 per cent to $1.44 a share.

The assets Cinram is buying from AOL includes related businesses in both the United States and Europe. They include manufacturing facilities in Olyphant, Pa., Commerce, Calif. and Alsdorf, Germany. It will also take over Ivy Hill Corp., a provider of packaging and printer and Giant Merchandising that is "engaged in entertainment merchandising, retail licenses and private label marketing and distribution."

"We are extremely pleased to be acquiring these quality assets and to be entering into these long-term agreements with AOL Time Warner, with whom we have had a long-standing and excellent relationship," Mr. Philosophe said.

One of the highlights of the deal would be Cinram's addition of AOL's customers, in particular Warner Bros., Patrick Tomalin of Orion Securities Inc. wrote on Thursday as reports of a possible deal surfaced.

"Warner is the leader in the U.S. home video market. Video Business News recently estimated their market share for the first half of 2003 at 21 per cent," Mr. Tomalin wrote.

"The addition of a deal with Warner would nicely complement Cinram's existing major contracts with Twentieth Century Fox and Artisan. Furthermore, since taking on the exclusive manufacturing and distribution business for Fox in North America Cinram has demonstrated its ability to handle a major studio contract."

Cinarm, according to reports Friday and earlier this week, had been believed to be one of two bidders.

"The agreement ensures these businesses and their employees a great home while continuing to provide Warner Music Group, Warner Home Video and New Line Cinema with the highest quality manufacturing and distribution services in the industry," Dick Parsons, AOL Time Warner's CEO, said.

© The Globe and Mail

Does this mean no more Snappers? if so that would be the bomb!

die, snappers, die!

Go, Canada!

No more snappers, we wonders, yes we wonders?

Wow, how much $$$ does WB make every year from DVD?

Does anyone have the answer?

You'd have to find their annual report, but I wouldn't be surprised if it were their top (or at least one of) source of revenue right now.

It's bad news for consumer's actually... If Cinram manufactures the current Fox and Artisan releases then I guess we'll see a lot more floaters, scratched, fingerprinted and defective DVDs and special metal slip cases that chews up DVD cases...

I agree with iove. This isn't exactly good news.

Remember Artisan's transfer of High Noon? If this happens with Warner's (hopefully) future classic film releases, we're in for some pain.

Hopefully, they'll just ruin The Matrix.

GO BLU RAY!!!! Say no to cheap, over compressed proposal by Warner.... GO BLU RAY!!!!

This deal has no effect on transfers. It's for manufacturing and distribution, which takes place after the film has been transferred for DVD. Production houses and the studios' in-house production facilities are responsible for transfers.

God, how sad is that? The first thing I thought of was, "Hmm, does this mean no more snappers?" and then I read the replies and the first 3 or 4 posters all had my exact same thought. It's pretty sad that Warner would keep producing something that is so universally hated. Anyways... if I had to bet, not that I'm a betting man, but I would bet this does mean no more snappers unless Warner made the continuation of the snapper as a part of the deal.

this could be some great news.

snappers suck.

What does CINRAM stand for?

i think all that they do is make the boxes and discs for mass distribution, while the studio and privately hired companies make the transfers and cover art, etc. all that CINRAM has to do is make billions of copies for the market, which they can improve upon, or make more floaters and stuff.

here's hoping that this will be the end of snappers....

The Matrix Reloaded looks to be the first of the discs produced under this new deal and will be the first Warner release in a keep case.

DVDFile had this news on 7/21/03:

OK. So if I buy the Matrix Reloaded in October, it is not going to look very well next to my Matrix snapper. Damn! I hope they are going to do something about the current Matrix packaging, like they did to Austin Powers.

They will probably have the Matrix SE ready by then. Of course that does not help for the Animatrix. :(