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Kids' show producer goes for bigger share of digital market

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CHILDREN'S show producer DHX Media Ltd. expects to increase global sales on digital platforms like Netflix and mobile devices following a $111-million deal to buy Toronto's Cookie Jar Entertainment.

Cookie Jar Entertainment, with shows such as Caillou and Inspector Gadget, is already the No. 1 supplier of kids' programming to online content provider Netflix, DHX Media chief executive and chairman Michael Donovan said Monday.

"The consumers can get programming exactly when they want it, not when it's on a schedule," Donovan said in an interview.

"Consumers are prepared to pay for that."

Halifax-based DHX, with shows like Kid vs. Kat, already sells content to Netflix and Donovan said the combined company will have even more content to sell to Netflix and a greater global sales potential.

"Families are increasingly accessing children's entertainment from sources other than traditional television and DVD sales," Donovan told a conference call to discuss the acquisition.

"Content is now available directly by way of computers, mobile, IPTV (Internet protocol television), standard television with an Internet connection, etc. For example, Cookie is a leader in the digital distribution of its library."

DHX Media (TSX:DHX) said the transaction will be paid through a combination of about $45 million in cash and shares and includes the assumption of $66 million of debt.

Announcement of the transaction caused DHX's shares to surge 24 per cent, gaining 27 cents to close at $1.41 on the Toronto Stock Exchange.

The combined company will have more than $125 million in revenues going forward, Donovan said.

Michael Hirsh, Cookie Jar's CEO, said the combined company will be an independent global market leader in all aspects of children's entertainment from distribution to production to licensing and merchandising.

"There is an insatiable appetite for kids' content in the new digital streaming universe and we are very well positioned with our extensive library of evergreen, popular and recognizable brands to satisfy the market demand," Hirsh said in a statement.

Privately held Cookie Jar also has digital distribution agreements in place with providers including DISH Network, and cable providers Comcast and Videotron (TSX:QBR.B), Donovan said.

DHX Media also produces programs such as Yo Gabba Gabba, Rastamouse, How to be Indie and That's So Weird.

Donovan billed the transaction as creating as Canada's largest children's entertainment company.

The acquisition will increase DHX's current library of children's programming to more than 8,550 half-hour episodes from about 2,550 half-hour episodes and will also expand merchandising opportunities.

He also said the merchandising, licensing and library and distribution segments of the combined companies will represent 58 per cent of total revenue.

There will be about $8 million in cost synergies in the first 12 months.

The companies have offices in the same cities such as Toronto and Los Angeles, he said. As for job cuts, Donovan said, "We have no plans one way or the other."

Cookie Jar also had $8 million in digital distribution revenue for the 12 months ending May 31, representing growth of 353 per cent versus the same period last year, Donovan said.

DHX media is the producer or co-producer of more than 60 original TV series.

Cookie Jar has offices throughout western Europe as part of its Copyright Promotions Licensing Group (CPLG), a leading licensor and merchandiser of third-party brands and characters.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition August 21, 2012 B5

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