Cinedigm Appoints 4 New Directors to Board to Appease Activist Investors

Major shareholder Ronald Chez will serve as a strategic adviser to the troubled digital distribution company following his criticism of leadership

Cinedigm appointed four new directors to its board, which is expanding from eight to 12 people, as part of a settlement agreement with activist investor Ronald Chez who has been unhappy with the company’s $11 million loss for the last quarter.

Blair Westlake, Andrew Schuon, Patrick O’Brien and Zvi Rhine of Sabra Capital are joining the board, effective immediately, the digital distribution company announced Friday.

The decision follows a disappointing fiscal quarter that ended in March with revenues falling 12 percent to $27.6 million. The company’s stock has taken a dive as well. Although it was trading at $2.33 a year ago, Cinedigm’s shares have remained below $1 since late April.

The company is facing de-listing by Nasdaq on December 7 unless the share price rises above $1 for 10 straight days. Cinedigm’s stock closed Thursday at 64 cents, down 3 percent.

Chez, who owns nearly 8 percent of the company in stock and debt through his Chicago-based investment firm, partnered with Sabra Capital to push for a $15 million share buy-back, tighter cost control and more board representation.

Chez expressed a desire to take over current CEO-chairman Chris McGurk’s role as chairman of the board, but said he would retain McGurk as CEO. “This a real company and a great opportunity,” he told TheWrap earlier this month. “It just needs the right leadership.”

As part of the new agreement, Chez will serve as a strategic adviser to the company, and will weigh in on the company’s financings and capital structure, strategic transactions and opportunities, including acquisitions and dispositions, among other matters.

“We are pleased to have Ron onboard as a Strategic Advisor,” McGurk said. “We have appreciated his thoughts and ideas thus far and look forward to working with him in a more formal capacity.”

New independent board director Rhine is a principal at Sabra Capital Partners with over a decade of financial and investing experience, while Westlake is currently a principal at MediaSquareup and was corporate vice president of Microsoft’s Media & Entertainment Group before that.

Schuon is the chief executive officer of Master Channel, a media and technology company, and is co-founder of “Sean” Diddy Combs’ multi-platform cable television network Revolt Media and TV.

O’Brien is a seasoned executive and business advisor, with 40 years of multi-unit international management experience with an emphasis in financial analysis and business development, who has served as a member of the board of directors of Merriman Holdings, Inc. since 2010.

“When the Company announced in May a plan to strengthen our board to better support our content distribution business and over-the-top digital network business, we undertook a best practices process that resulted in many qualified candidates to choose from,” McGurk said in a statement.
“Since then, our nominating committee has been working hard to interview the candidates. Today, we are pleased to announce that our search led us to Blair, Andy, Zvi, and Patrick. Collectively, they bring important entertainment experience, financial expertise and significant industry relationships to our Board, and we are certain they will help guide Cinedigm as we continue to grow the Company and build shareholder value.”

As TheWrap previously reported, Cinedigm announced a plan in May to overhaul its board and hired executive search firm Korn Ferry to seek two to four new directors, including a new board chairman. The search for a new chairman is ongoing.

An executive close to Cinedigm told TheWrap that McGurk is actively seeking a new chairman but prefers to find one with more direct experience in entertainment, digital or marketing and a high profile in Hollywood.

Unlike Chez, whose background is in finance, such a figure could assist in the company’s ambitions in OTT content, TV and video content delivered via the Internet rather than a service provider.