Tom Gores’ Platinum Equity Acquires Distribution Business From Deluxe Entertainment

Investor recently took ownership of brother Sam Gores’ Paradigm talent agency

Investor Tom Gores scooped up another entertainment asset through his firm Platinum Equity, acquiring the distribution business of digital cinema distribution company Deluxe Entertainment.

The financial terms of the deal were not disclosed, but it does not include Deluxe’s creative businesses.

“Deluxe has been a cornerstone of the entertainment industry for more than 100 years,” Gores said in a statement. “The company drove the evolution of digital cinema distribution and has continued to reinvent itself in partnership with content creators around the world. At this pivotal time for the industry, [former Deluxe CEO Cyril Drabinsky’s] leadership, combined with Platinum’s financial resources and operational expertise, will help the company move forward stronger than ever. This is the first of several things to come in this space.”

Former Deluxe CEO Cyril Drabinsky, who left the company in 2016 to found digital cinema facility CineVizion, is returning to lead the business as CEO under Platinum Equity’s ownership. As part of the transition, CineVizion’s assets will also be integrated into Deluxe.

Deluxe, founded as a film processing lab in 1915 as part of the Fox Film Corporation, today provides a full suite of solutions to some of the world’s leading content production studios and distributors. The company has approximately 3,400 employees globally with hubs in Los Angeles, Bangalore, London, and Sydney.

Deluxe is comprised of four segments: Localization (subtitling and dubbing), digital cinema (mastering, key generation and distribution to theaters), home entertainment (compression, encoding and authorizing) and fulfillment (encryption, transcoding and distribution of movies and tv content).

Gores also recently bought an ownership stake in his brother Sam Gores’ Paradigm talent agency through another investment company, Crescent Drive Media.

TheWrap previously reported that Tom Gores is leading talks to potentially unload Paradigm’s lucrative music assets, and has assumed functional oversight of the beleaguered agency.

“The entertainment industry, like many others, has been seriously disrupted by the coronavirus crisis,” Gores said. “It will take both experience and tenacity to make it through to the other side, but we are confident that good companies with strong fundamentals and capable leadership will not only survive this crisis, but thrive.”

Gores founded Platinum Equity in 1995 and now the firm has $23 billion of assets under management and a portfolio of approximately 40 operating companies ranging from manufacturing and distribution to entertainment and technology. The firm specializes in mergers, acquisitions and operations, completing more than 250 acquisitions in the last 25 years.

Former Deluxe executive Mike Gunter is also joining the leadership team as chief financial officer at Deluxe under Drabinsky. Warren Stein, who served as chief operating officer of Deluxe until 2016, is also returning to fulfill the same role. And former Deluxe President of post-production William Sherak, who advised Platinum Equity on the acquisition, will remain in an advisory role with the company going forward.

Drabinsky was an executive at Deluxe for nearly 20 years and led the company’s transformation from an analog film processing business into a digital post-production technology and distribution service provider.

“Platinum is an excellent home for Deluxe and this investment represents a strong commitment to our history and to the entertainment industry at a critical time in our business,” Drabinsky said in a statement. “With Deluxe as part of the Platinum family, the company will have the support it needs to move into ever more innovative ways to serve the creative community. I am honored that Tom Gores and his team have entrusted me to lead the company that has been such a huge part of my career.”

The Deluxe and CineVizion deals represent the fourth and fifth buy-side transactions Platinum Equity’s Small Cap team has completed in the last four months. Platinum Equity also announced on Wednesday that it acquired cosmetics distributor L&R Distributors, and in June Platinum Equity acquired Bond Manufacturing, an add-on to Orbit Irrigation. In April, the firm announced the acquisition of Italian winemaker Farnese Vini.

Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel to Platinum Equity on the acquisitions of Deluxe and CineVizion.  Alston & Bird LLP provided legal counsel to Platinum Equity on the financing of the transactions.

Moelis & Company LLC acted as financial advisor to Deluxe Entertainment Services Inc. and Stroock & Stroock & Lavan LLP acted as its legal counsel. Sklar Kirsh provided legal counsel to CineVizion.

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