Canada’s Alliance, Atlantis to Merge in Stock Swap

Two of Canada’s largest film and television production companies, Alliance Communications Corp. and Atlantis Communications Inc., have agreed to merge in a $129-million stock swap that they envision would enable them to expand in cable and television production in the U.S.

Under the complicated deal, shareholders of Atlantis would get half a share of Alliance stock for each Atlantis share they hold. When the transaction is completed, the four partners of Atlantis, a 20-year-old production company that is half the size of Alliance, would control 40%--the biggest single block--of the resulting company, Alliance Atlantis Communications Inc.

“We will join forces to take over the world,” said Robert Lantos, chief executive of Alliance, who would step down from his management role if the transaction is approved by shareholders in September to return to film production for Alliance Atlantis.

Under a new contract, Lantos would complete the seven motion pictures Alliance has in development, including David Cronenberg’s “eXistenZ,” Istvan Szabo’s “The Taste of Sunshine” and Denys Arcand’s “15 Moments.”

Atlantis co-founder Michael MacMillan would become the merged entity’s chairman and chief executive, while Lewis Rose, president of Atlantis, would become president of the new company. Victor Loewy, vice chairman of Alliance, would remain a director and would head Alliance’s motion pictures group.

“This was not motivated out of despair,” said Peter Sussman, an Atlantis principal who would continue to head the company’s Los Angeles office. “We are both making good money, but as the world consolidates, it is clear that we must get bigger or get bought. This is to position us not for the next year or two, but for 2005.”

In addition to creating a company with a market value of about $650 million, giving Alliance Atlantis more financial resources to draw upon, the merger would produce millions of dollars in cost savings, especially in overlapping businesses such as cable programming and television production. Each company operates two cable channels in Canada, including Showcase, History Television and Home and Garden TV Canada.

While Atlantis has no feature film experience, it produces television programs such as “Gene Roddenberry’s Earth: Final Conflict” and will have its first network prime-time series, “Legacy,” this fall at UPN.

Alliance is best known for producing Oscar nominee “The Sweet Hereafter” and the popular television series “Due South.”

“It gives them a very strong, I’d say almost dominant, position in the Canadian marketplace, which should be a good launching point to further penetration of the U.S. marketplace,” said David Doft, analyst with Furman Selz in New York.