DHX Media has inked a definitive deal with Sony Music Entertainment Japan (SMEJ), which is indirectly buying 49 percent of DHX’s 80 percent interest in Peanuts for C$237 million ($185 million) in cash.
DHX Media will own 41 percent of Peanuts, SMEJ will own 39 percent and the family of Charles M. Schulz will continue to own 20 percent. DHX and SMEJ are also extending the duration of the current licensing and syndication agency deal with SMEJ’s CP division in Japan, Sony Creative Products, which has represented the brand since 2010.
Subject to approval, the transaction is expected to close by June 30, 2018. DHX Media plans to use the net proceeds to pay down its debt and reduce leverage.
“We are honored to deepen our relationship with Sony Music Entertainment (Japan) as we continue our expansion of Peanuts globally,” said Michael Donovan, the executive chair and CEO of DHX Media. “Sony Music Entertainment (Japan) has incredible expertise in rights management across the entertainment and consumer products industries, having successfully grown the Peanuts business in Japan over 200 percent since they became our agent in 2010. This transaction will allow DHX Media to de-lever our balance sheet as we team up with an ideal partner to help us reach our worldwide growth targets for Peanuts in the coming years.”
Meanwhile, DHX Media reported its Q3 and nine-month results for the fiscal quarter ended March 31. Revenue at the company increased by 49 percent to $116.5 million. For the nine months of fiscal 2018, revenue was up 60 percent to $337 million. There was a 55 percent rise in total distribution revenue to $98.4 million YTD 2018. Gross margins were 44 percent for both Q3 and YTD 2018. This compared to 54 percent in Q3 2017 and 55 percent YTD 2017.
For Q3 2018, adjusted EBITDA was $26.7 million with a net loss of $8 million versus adjusted EBITDA of $24.9 million and net income of $7.6 million in Q3 2017. For YTD 2018, adjusted EBITDA was $81.5 million with a net income of $7.6 million as compared to adjusted EBITDA of $63.7 million and a net income of $14.7 million in the same period last year.
“While top- and bottom-line results were below our expectations this quarter, content distribution and WildBrain delivered strong organic growth and Peanuts continued to perform ahead of plan,” noted Donovan. “We have taken corrective steps to return to sustainable growth, including executive changes, additional streamlining of costs and a refocusing of our business to enhance margins and cash generation.”
Donovan added: “Furthermore, the Strategic Review has reaffirmed the value of our individual assets and generated strong interest especially in our leading portfolio of intellectual property. The review process is ongoing, but so far has yielded a deeper partnership with Sony on Peanuts, as announced earlier. The net proceeds from that transaction will be used to primarily de-lever our balance sheet by an estimated one turn. We are also in advanced discussions on material licensing opportunities that we believe could have a positive impact on operating results and further reduce debt.”