Publicly traded, New York-headquartered Paradise Music & Entertainment Inc. (NASDAQ: PDSE) has entered into an agreement to acquire Straw Dogs, a Santa Monica-based commercial production company, from director Jesse Dylan and executive producer Craig Rodgers for 900,000 shares of restricted Paradise common stock. Based on a closing price at press time of a little more than $6 a share, the transaction value is in excess of $5.4 million. The proposed deal-which is subject to due diligence-is expected to close by mid-June. Once the sale is finalized, the 900,000 shares would be restricted from being traded for a full year.
Dylan has been named CEO of Paradise, with Rodgers serving as president/CEO of Straw Dogs. Paradise has also hired Jay Moloney as its president. Best known for his tenure as a high-powered agent and later a partner at Creative Artists Agency, Beverly Hills, Moloney is expected to open up long-form opportunities for Paradise and potentially the Straw Dogs ensemble of directors, according to Rodgers. The Straw Dog directorial roster consists of Dylan, Marco Brambilla, Neil Burger, Charlie Cole and Mike Rowles. And, director Rob Lieberman maintains his own bicoastal shop, The Lieberman Company, in association with Straw Dogs.
Paradise has also entered into a letter of intent to buy Dylan’s private holding company-through which his directorial and production services are conducted-in exchange for 541,000 restricted Paradise shares valued at about $3.25 million at press time. And per his employment agreement, Dylan has been granted options to purchase additional shares of Paradise stock.
Dylan and Rodgers became equal owners/partners in Straw Dogs in Feb. ’98 after buying out the interest in the company held by commercial entrepreneur/ exec. producer Don Block. The three-year-old Straw Dogs reported approximately $19 million in revenue this past year, with a pre-tax profit of around $1 million.
Paradise was launched in ’96. Its current holdings are: concert film and music video production house Picture Vision, Nashville; spot music house Rave Music, New York (which also maintains alchemy, a New York-based commercial music division); music artists management company All Access Entertainment Management Group, New York; and independent record label PUSH Records, New York.
According to public accounts, Picture Vision, Rave Music and All Access have been profitable ventures while PUSH Records has generated considerable red ink. But a recent relationship PUSH entered into with V2 Records-owned by U.K.-based Virgin Group entrepreneur Richard Branson-has buoyed financial prospects for PUSH, according to a Paradise press representative. Still, the bottom-line figures for Paradise in its last full fiscal year (ending June 30, ’98) showed a net loss of $2.9 million on revenues of $13.6 million. Paradise’s revenues for the first six months of the current fiscal year were $5.7 million, with an operating loss of $1.3 million. Last September, because Paradise’s net asset value was below the required threshold, NASDAQ threatened to de-list the company’s shares.
However, since that time, Paradise has had a significant infusion of capital, with the promise of more to come. In February ’99, The Cassandra Group, a New York-based investment advisory firm, invested $2.1 million in Paradise. Shortly thereafter, Cassandra designated Dylan and two others to serve on the Paradise board. Headed by president Dana Giacchetto, Cassandra represents investors-both individuals and organizations-from the arts and entertainment industry. Those investors reportedly include such notables as Dylan and movie stars Leonardo DiCaprio, Cameron Diaz, Matt Damon and Ben Affleck.
And last month (4/23), Cassandra announced plans to invest on behalf of its clients another $8 million in more than 1.5 million shares of Paradise stock. Additionally, Giacchetto will become a financial consultant to Paradise in exchange for 200,000 shares of restricted stock and three-year warrants to purchase another 800,000 shares. The buzz in the financial community is that Giacchetto’s involvement in Paradise seems to bode well for the company’s prospects. Last November, Giacchetto formed a private fund with Chase Manhattan Corp. to invest in small entertainment companies. Per the arrangement, Chase Capital Partners, a Chase unit, agreed to commit $50 million to $100 million to the newly dubbed Cassandra Chase Entertainment Partners fund. That fund is separate from The Cassandra Group. There’s speculation that perhaps the Chase deal could, down the road, translate into additional capital for Paradise but that could not be confirmed at press time.
Rodgers contended that the recent infusion of capital into Paradise signals a growing economic clout that will enable Straw Dogs to launch an expansive business plan. He said, for instance, that Moloney will have the resources to help Paradise "create and finance our own feature films … That means real long-form opportunities for the directing talent here." Rodgers added that the continued building of Paradise’s working capital could help finance the acquisition of other commercial production houses. "In today’s commercial production environment," observed Rodgers, "you either have to be a mom-and-pop operation or one of the biggest and best. We’re looking to become one of the biggest and best, and this deal with Paradise will put us in a position to realize that goal."
Dylan was unavailable for comment at press time. A released statement from Dylan said: "Joining Paradise as CEO represents an opportunity to lead the creation of a new kind of multi-faceted, talent-based, public entertainment company. Adhering to a very bottom-line oriented strategy, we look to build upon the Paradise platform by exploring a range of acquisition opportunities in the media and entertainment industries. In particular, we see attractive opportunities to expand Paradise’s operations in the music, music publishing, commercial production, film, television and Internet markets as well as in other entertainment media."
Plans also call for Paradise’s executive offices and Straw Dogs to relocate to a building complex in Los Angeles that is owned by Dylan and Rodgers.
