Platinum Equity has acquired the digital film distribution business of Deluxe Entertainment in partnership with the company’s former CEO Cyril Drabinsky.
Deluxe was founded in 1915 as a film processing lab within Fox Film Corporation. The company was owned by MacAndrews & Forbes (controlled by Ronald Perelman) from 2006 to 2019 and struggled with negative cash flows caused by fewer wide releases of films, delays of film projects, and the decline in DVD and Blu-Ray sales. The company began a pre-packaged bankruptcy in October 2019 that resulted in it being acquired by creditors (Sound Point Capital Management, CION Investment, CIFC Asset Management and Invesco) in a debt-for-equity swap.
Deluxe has just over 3,400 global employees with locations in Los Angeles, Bangalore, London, and Sydney. Deluxe’s creative businesses – visual effects, post-production and 2D-3D conversion services – are not included in the Platinum transaction.
“The entertainment industry, like many others, has been seriously disrupted by the coronavirus crisis,” said Tom Gores, chairman and CEO of Platinum Equity. “It will take both experience and tenacity to make it through to the other side, but we are confident that good companies with strong fundamentals and capable leadership will not only survive this crisis but thrive.”
Former Deluxe CEO Cyril Drabinsky, who left the company in 2016 to found CineVizion – a provider of digital cinema services with locations in Los Angeles and Toronto – is returning to lead the business as CEO under Platinum’s ownership. Mr. Drabinsky was an executive at Deluxe for nearly 20 years and led the company’s transformation from an analog film processing business into a digital post-production technology and distribution services provider. As part of Platinum’s partnership with Mr. Drabinsky, CineVizion’s assets will be integrated into Deluxe.
“Platinum is an excellent home for Deluxe and this investment represents a strong commitment to our history and to the entertainment industry at a critical time in our business,” said Mr. Drabinsky. “With Deluxe as part of the Platinum family, the company will have the support it needs to move into ever more innovative ways to serve the creative community. I am honored that Tom Gores and his team have entrusted me to lead the company that has been such a huge part of my career.”
In addition to Mr. Drabinsky signing on with Deluxe, Mike Gunter – the company’s CFO from 2005 to 2011 – returns in the same role, and Warren Stein – who served as the chief operating officer of Deluxe until 2016 – also rejoins the company in the same position.
“Deluxe has been a cornerstone of the entertainment industry for more than 100 years,” added Mr. Gores. “The company drove the evolution of digital cinema distribution and has continued to reinvent itself in partnership with content creators around the world. At this pivotal time for the industry, Cyril’s leadership, combined with Platinum’s financial resources and operational expertise, will help the company move forward stronger than ever. This is the first of several things to come in this space.”
Platinum Equity invests in a range of industries including manufacturing, distribution, transportation and logistics, equipment rental, metals services, media and entertainment, technology, and telecommunications. The firm is currently investing from Platinum Equity Capital Partners V LP, a $10 billion buyout fund, and Platinum Equity Small Cap Fund LP, a $1.5 billion buyout fund focused on the lower middle market. The firm has completed more than 250 acquisitions since its founding in 1995 and is headquartered in Beverly Hills.
The Deluxe and CineVizion transactions are the fourth and fifth buy-side transactions completed by Platinum’s small-cap team over the past four months. The three earlier buys were L&R Distributors, a Brooklyn, New York-headquartered general merchandise distributor to the supermarket, drug, independent and mass retail channels (July 2020); Bond Manufacturing, an Antioch, California-headquartered maker of irrigation and garden products (June 2020). The buy of Bond was an add-on to Orbit Irrigation; and Farnese Vini, an Ortona, Italy-based winemaker (acquired in March 2020 from NB Renaissance Partners).
Moelis & Company was the financial advisor to Deluxe on this transaction.
Private Equity Professional | July 7, 2020
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