DHX Media to cut its debt load with money from Sony Peanuts deal: CEO

DHX Media Ltd. said Monday the sale of nearly half of its stake in the Peanuts entertainment business to a Sony Corp. division for $237 million in cash will help reduce the Canadian animation company’s debt load and improve its operating results.

The Halifax-based company will retain 41 per cent of the Peanuts empire, which revolves around characters such as Snoopy, Charlie Brown and Lucy Van Pelt, while Sony Music Entertainment (Japan) Inc. will own 39 per cent. The family of creator Charles M. Schulz will continue to own 20 per cent.

DHX executive chairman Michael Donovan said Monday that Sony is paying a 25 per cent premium over what DHX Media paid just last year and it will also help the Canadian company build the Peanuts brand in Asia.

Sony acquired rights to the Peanuts franchise in Japan in 2010. Its success in building Peanuts in Japan “provides a template for success in other markets, particularly other Asian markets, particularly China.”

Snoopy and other Peanuts characters are extremely popular in Japan, featured in a variety of everyday goods from T-shirts to plastic chopsticks.

Peanuts began as a comic, first published in American newspapers in 1950. It’s now carried in 2,200 newspapers around the world in 21 languages. In 2020, it will celebrate its 70th anniversary. Schultz, who used to say that all he wanted to do was to “draw funny pictures,” died in 2000.

The comic series was translated into Japanese decades ago, becoming an instant hit.

Donovan said in an interview that “there’s great knowledge and advantage to be gained from that partnership, not only in China, Japan and but throughout Asia.”

The transaction will reduce its debt load “as we team up with an ideal partner to help us reach our worldwide growth targets for Peanuts in the coming years,” Donovan said.

DHX bought majority ownership of the Peanuts and Strawberry Shortcake brands last year under a US$345-million deal that significantly increased its revenue but also its debt load.

The Halifax company has been undergoing a strategic review of its options, including a potential sale of the company, as it struggles under the weight of its debt. Earlier this year, the company announced a management shake up, including replacing its chief executive officer and chief financial officer.

Its shares were down 10 per cent Monday morning after the Canadian animation company announced a quarterly loss and said it may not achieve its previously announced guidance for fiscal 2018.

The shares fell to $3.81 per share, down 43 cents.

DHX, a leading children’s content and brand company, known for Strawberry Shortcake as well as producing children’s shows, had a loss of $8 million in the three months ended March 31 and $116.5 million of revenue.

That compared with a year-earlier profit of $7.6 million and $78.3 million of revenue in the comparable quarter last year, prior to its acquisition of majority ownership for the Peanuts and Strawberry Shortcake franchise in mid-2017.

DHX said Monday that it’s in advanced negotiations on potential licensing deals but “in the absence of completing one of these opportunities, the company does not expect to achieve its previously disclosed guidance for fiscal 2018.”