3i has offered 425p per share to buy entertainment rights company Chorion for an equity value of £110.7m (US$193.4m), excluding about £20m of debt.
The price is a 23.2% premium to the 345p per share closing price of Chorion on February 21. Shareholders with 43.7% of the stock have agreed to accept the deal, which is about 34x estimated future earnings.
Chris Williams, a senior partner at 3i who is working on the public-to-private bid, said: “There is a lot of work to be done in the existing portfolio of assets. The business has had three years of very rapid growth but is now entering a phase where it needs intensive investment. Because of this, it will benefit from a period away from the short-term demands of the stock exchange.”
Waheed Alli, chairman of Chorion, echoed this sentiment, saying: “We are entering a challenging period in our development, where substantial investment will be needed, the risks will be higher and returns take longer to realise.”
According to Williams, 3i had tracked the company for some time and knew the management very well. “We had identified this as an attractive space because the increasing fragmentation of audiences means that high quality content is becoming more and more valuable,” he said.
Chorion owns the rights to children and crime publishing, such as from Enid Blyton (Mr Men and Noddy) and Agatha Christie. 3i’s purchase follows rival Apax Partners’ acquisition of HIT Entertainment for £500m last year
3i is backing the management buyout through the Planet Acquisitions vehicle, with debt arranged by GE Commercial Finance. The £78.5m debt package includes senior and mezzanine elements. Chorion’s management team is Alli, chief executive Nicholas James, Sue Murphy and William Astor.
Rothschild is advising Chorion, with UBS acting for 3i and KPMG for the management team.