Aims high with $ 32 mil stock offer
At the same time, Savoy, which aspires to be an instant major, unveiled a slate of pictures mobilizing the talents of big-name filmmakers and actors.
The quick leap from privately held entity to public company is an integral step in fulfilling the founders' dream of building Savoy into a viable distribution alternative to the Hollywood majors.
And if Savoy can sell itself successfully on Wall Street, it opens the door to virtually unlimited growth in the future.
"The whole point of this offering is not the funds it will raise -- they've already got enough money to do what they want at the moment," said one Wall Street insider. "The point is simply to complete it so that they become a public company and are able to take advantage of all that comes along with that."
According to the prospectus filed Friday with the Securities & Exchange Commission, Savoy plans to sell 2 million common shares at between $ 13 and $ 15 per share. Based on an assumed offering price of $ 14 per share, net proceeds to Savoy -- after underwriting discounts, commissions and offering expenses -- are an estimated $ 25.5 million.
Lead underwriter Allen & Co. will have the option to purchase an additional 300,000 shares to cover over-allotments if necessary.
Savoy will use the proceeds from the offering to help fund and build its new motion picture slate. The proceeds, coupled with the $ 165 million in capital already raised, will be sufficient to meet its cash requirements for the next year.
The company has already committed $ 46 million to acquire film rights. It estimates the net aggregate cost of acquiring and releasing 12 to 15 pix per year in the domestic marketplace at $ 250 million to $ 350 million.
To that end, Savoy is currently negotiating terms of a revolving credit agreement with a number of commercial banks.
Wall Street sources agree the stock offering is a very smart strategic move for the company -- one that will increase its financing alternatives exponentially.
"One lesson people in the film business have learned over and over and over again is that you can never have too much equity," said an investment banker.
And the timing seems right. Surging equity markets have been highly receptive to new offerings (Savoy will be listed on NASDAQ), and most believe Allen & Co. -- with its strong institutional ties -- should have little trouble finding buyers for the shares.
At the same time, some express concern about the investment itself. "They're selling on the dream rather than the reality, which is great for them," said a money manager. "But as an investor, I want to buy on the reality and not the dream, and they don't even have their first picture out."
And no one has forgotten other companies that were convinced they could beat Hollywood at its own game -- DeLaurentiis and Orion, to name just two.
But while comparisons to failed ventures are sometimes reasonable -- Savoy, like Orion, promotes itself as being filmmaker-friendly -- others are not.
Orion was never properly capitalized and relied heavily on debt, while Savoy's market capitalization after the offering will consist of $ 163 million of equity and just $ 27 million of long-term debt.
And the current stockholders of the company will retain about 87% of the shares then outstanding.
They include Kaufman and Korman, GHK Investments L.P., an investment partnership managed by Jay and Tom Pritzker, investment banker Dan Lufkin and attorney Mel Klein, Home Box Office, Allen & Co., Cinergi's Andy Vanja, former Columbia chairman Frank Price, Judd Enterprises (which includes former Columbia/TriStar directors Judd Weinberg and Richard Weinberg), and a handful of foreign financing sources including Vittorio Cecchi Gori and Silvio Berlusconi, Japanese trading company Mitsui, Carlton Communications subsidiary High Speed Video and French entertainment conglomerate Chargeurs.
