Bain Buys Golden Books for a Song –

Pat the Bunny may soon get his big TV break.

That’s because the private equity backer of DIC Entertainment Holdings Inc., Boston-based Bain Capital Inc., has agreed to pay $70 million in cash to purchase distressed Golden Books Family Entertainment Inc. (from which Pat the Bunny is a character). Roughly 25 million kids in the U.S. watch DIC’s programs each week.

The transaction has been made through the holding company DIC GB Acquisition Corp. Bain will also assume roughly $90 million in liabilities and supply a $7 million promissory note under the terms of the deal.

“We look at this [transaction] as a platform-as a first in a series of acquisitions we’re looking to make in this space,” said Joe Pretlow, a managing director at Bain, adding, “the children’s space is extremely fragmented.”

For its part, Golden Books and its domestic subsidiaries filed for Chapter 11 bankruptcy protection in order for the transaction to go forward. The company emerged from its prior Chapter 11 filing in January 2000, and filing this time is reportedly to disentangle itself from any remaining legal claims.

Golden Books was introduced in 1942 as a series of 42-page hard cover books that sold for 25 cents. In 1995, Richard Snyder, former chairman and CEO for Simon & Schuster Inc., struck a deal with New York investor Richard Bernstein to take control of the company. Bernstein and other senior executives at Western (originally Western Printing & Lithographing Co., Golden Books’ turn-of-the-century predecessor) bought the company from Mattel in 1994. The deal between Snyder and Bernstein did not pan out until a year later when they announced another deal that was acceptable to the shareholders. The deal made Snyder chairman and CEO in May 1996, and Western Publishing became Golden Books Family Entertainment Inc. (Snyder will stay with the merged company as DIC Entertainment co-chairman.)

“Golden Books is one of the most recognized branded names in the children’s space,” said Pretlow. “And there’s a driving need for branded, high quality programming.”

Among Golden Books’ leading brands are (aside from Pat the Bunny), Lassie, Underdog, the Poky Little Puppy and a variety of seasonal franchises, including Frosty the Snowman, Rudolph the Red-Nosed Reindeer and the Little Drummer Boy. DIC Entertainment meanwhile owns such evergreen brands as Inspector Gadget, Madeline, Sabrina the Teenage Witch, Where on Earth is Carmen Sandiego?, Action Man, Sonic the Hedgehog and Super Mario Bros.

Pretlow talked of “delivering synergies” and said, “There’s a strong move toward consolidation, and strong economics around building critical mass through all distribution channels.” As an example, he said, “DIC will exploit intellectual property through the book channel.”

Golden Books has a library of more than 500,000 titles, including an extensive comic book collection, 3,000 movies, plus television series, specials and cartoons. DIC will maintain Golden Books’ worldwide distribution network. The brand is carried in about 100,000 stores.

And as a result of the deal, DIC will own the second largest library of American animation in the world, with more than 2,500 half-hours of programming. Pretlow said there are also cross-marketing opportunities in video for Golden Books, where DIC has a history of delivering.

Bain Capital purchased DIC Entertainment in November 2000 from the Walt Disney Co. in partnership with Andy Heyward. DIC Entertainment is a major children’s entertainment company focused on developing, producing, distributing, and merchandising children’s animated programming worldwide. Since its founding in 1983, DIC has produced roughly 100 series and 3,000 episodes.

Pretlow emphasized that the acquisition of Golden Books, “is truly a partnership, [both] financial and strategic, with Heyward,” DIC’s chairman and CEO.

Heyward was an animation writer and producer in 1983 when DIC decided to establish a North American presence under his direction. (The company was founded in Paris in 1971.) Under Heyward’s leadership, the company produced more than 1,800 episodes and 60 properties between 1986 and 1993, the year he formed a limited partnership with Capital Cities/ABC with the company’s assets. DIC was then acquired by Disney, which bought ABC, whereupon it became a unit of the Disney’s Filmed Entertainment division.