Movie Distribution Income Fund Market Update



    TSX: FLM.UN

    TORONTO, June 18 /CNW/ - In response to market rumours and speculation,
Movie Distribution Income Fund (TSX: FLM.UN) today provided the following
market update on the status of its activities and discussions with Alliance
Atlantis Communications Inc. ("Alliance Atlantis") and GS Capital Partners VI,
L.P. ("Goldman Sachs").
    On October 20, 2006, Alliance Atlantis announced its desire to explore
ownership alternatives in relation to its interest in Motion Picture
Distribution LP ("MPD"). Following the formation of a special committee (the
"Special Committees") of the board of each of the Fund, its subsidiary trust
(together or respectively, the "Fund") and the general partner of MPD, on
November 8, 2006, the Fund announced that it too had determined to participate
in a process that may result in a sale of some or all of its interest in MPD.
This joint process was pre-empted when, on January 10, 2007, Alliance Atlantis
announced that it had entered into an agreement contemplating a plan of
arrangement (the "Arrangement") of or involving itself, CanWest Mediaworks
Inc. and Goldman Sachs. According to their public disclosure, the Arrangement
contemplates among other things that Alliance Atlantis' interest in MPD would
be controlled by a Canadian partner of Goldman Sachs.
    In many material respects, MPD and the Fund are dependent upon Alliance
Atlantis. This dependence manifests itself both in relation to the Fund's
internal operations as well as arrangements with third parties; in addition to
the intangible benefits the Fund receives from being closely associated with
one of Canada's leading media and entertainment enterprises. Any change of
control of MPD could have material consequences to the Fund. Accordingly, when
the Fund was established, it was given a right to consent to certain proposed
transfers by Alliance Atlantis of its interest in MPD. This is necessary so
that the Fund can be satisfied that, at the very least, it is not going to be
prejudiced by a transfer of ownership and provides the Fund with the ability
to approve its proposed partner in MPD. As it is apparent that the intention
of the parties is that Alliance Atlantis' 51% interest in MPD be transferred
to a Canadian partner of Goldman Sachs, the Fund believes the Arrangement
triggers the Fund's right to consent.
    Accordingly, immediately after the Arrangement was announced, the Fund,
through its trustees commenced seeking clarification from Goldman Sachs
regarding its plans for MPD going forward. Since the Fund could not determine
at that time from Goldman Sachs the identity of its proposed Canadian partner
nor what their plans going forward for MPD would be, the Fund (through its
subsidiary trust) determined that the only appropriate course of action would
be to secure its right to consent to the Arrangement until such time that it
fully understood the implications to MPD and the Fund that would arise out of
the Arrangement. Accordingly, on April 4, 2007, the Fund asked the Ontario
Superior Court of Justice for an order that, among other things, the
Arrangement not be consummated without the prior consent of the Fund.
    In the course of numerous discussions directly and through advisors with
Goldman Sachs since announcement of the Arrangement, Goldman Sachs has
expressed an interest in acquiring the 49% interest in MPD owned by the Fund.
In an effort to advance those discussions as well as to co-operate in
facilitating the proposed Arrangement, MPD has provided Goldman Sachs with
broad access to management and confidential information, subject to the terms
of a standard non-disclosure and standstill agreement, which, for a period of
time, precludes Goldman Sachs from initiating an unsolicited offer to acquire
the Fund or its 49% interest in MPD without the prior consent of the Fund's
trustees.

    To date, Goldman Sachs' proposals (including those received in writing)
to acquire the 49% interest in MPD, have indicated an amount:

    
    -   that may be less than the price Goldman Sachs has agreed to pay for
        AACI's 51% interest in MPD (which includes subordinated units of
        MPD);
    -   that is less than expressions of interest previously received from
        third parties interested in acquiring MPD; - that would be below a
        range of value acceptable to the Special Committees based upon, among
        other things, advice from their financial advisor, CIBC World Markets
        Inc.; and
    -   at which Goldman Sachs has advised it would not be willing to sell
        its interest in MPD assuming completion of the Arrangement.
    

    Goldman Sachs' proposals have also been conditional upon, among other
things, further due diligence, waiver of the Fund's consent right in respect
of the proposed transfer of AACI's interest in MPD (regardless of whether
unitholders ultimately reject any proposal by Goldman Sachs), and unilateral
determination of transaction structure.
    In the event that Goldman Sachs and its Canadian partner make a bona fide
proposal, the Trustees will carefully examine and evaluate such proposal and,
with advice from the Fund's financial and legal advisors, determine an
appropriate course of action. In examining any such proposal, the Trustees
will assess numerous factors including but not limited to, the price offered
in relation to the estimated range of value for the Fund's 49% interest in
MPD; if determinable, the price negotiated for the 51% interest in MPD owned
by AACI control block, roughly half of which is comprised of subordinated
units; and the value to Goldman Sachs and its Canadian partner in acquiring
the 49% interest in MPD together with the Fund's associated veto rights over,
among other things, acquisitions, distribution policy and indebtedness of MPD.
    "We have been working tirelessly to both preserve and enhance MPD's long
term value and the Fund's interest therein, while at the same time engaging in
discussions with Goldman Sachs in an effort to arrive at a transaction
proposal that offers unitholders a liquidity alternative at a fair value"
stated Mr. Rubin Osten, Chair of the Special Committee of the Fund. "We remain
optimistic that discussions with Goldman Sachs will continue and that we will
be able to achieve both of these goals." However, there can be no assurances
that any such discussions will result in a firm offer by Goldman Sachs for the
units of the Fund at a price that reflects fair market value, if at all."

    About Motion Picture Distribution LP and Movie Distribution Income Fund

    Motion Picture Distribution LP (the "Partnership") is a leading
distributor of motion pictures in Canada, with a presence in motion picture
distribution operations in the United Kingdom and Spain. The Partnership
distributes filmed entertainment to theatres, on video and DVD, and to
television broadcasters. Alliance Atlantis Communications Inc. (TSX: AAC.A,
AAC.B) indirectly holds a 51% ownership interest in the Partnership and Movie
Distribution Income Fund (TSX: FLM.UN) indirectly holds the remaining
ownership interest in the Partnership.

    Forward-Looking Statements

    This press release includes forward-looking statements, which are based
on certain assumptions and reflect the current expectations of Movie
Distribution Income Fund (the "Fund") and the Partnership. Forward-looking
statements are those which are not historical fact and include, but are not
limited to, statements of the Fund's or the Partnership's expectations and
intentions. The reader should not place undue reliance on them. They involve
known and unknown risks, uncertainties and other factors that may cause them
to differ materially from the anticipated future results or expectations
expressed or implied by such forward-looking statements, including among other
things whether the Court will grant the relief requested by the Movie
Distribution Holding Trust. Important factors that could cause actual results
to differ materially from those set forth in the forward-looking statements
include: a change of control of Alliance Atlantis, audience acceptance of our
filmed entertainment, our relationship with filmed entertainment content
suppliers; the loss of key personnel, technological change that increases
competition or facilitates the infringement of our intellectual property,
changes to the regulatory environment, actions of our competitors and changes
in the general economy. Additional information about these factors and other
factors are described in materials filed by the Fund with the security
regulatory authorities in Canada from time to time, including the Fund's and
the Partnership's Management's Discussion and Analysis ("MD&A") for the year
ended December 31, 2006. Neither the Fund nor the Partnership undertakes any
obligation to publicly update or revise any forward-looking statements or
information, whether as a result of new information, future events or
otherwise.

    This press release - including financial statements - is distributed via
Canada NewsWire (www.newswire.ca) and posted to the Movie Distribution Income
Fund's website (www.moviedistributionincomefund.com).

    (*) "Alliance Atlantis" with the stylized "A" design is licensed from
Alliance Atlantis Communications Inc., an indirect limited partner of Motion
Picture Distribution LP, not a general partner.





For further information:

For further information: Lloyd A. Wiggins, Chief Financial Officer,
Movie Distribution Income Fund, Tel: (416) 966-7266,
lloyd.wiggins@allianceatlantis.com

Organization Profile

MOVIE DISTRIBUTION INCOME FUND

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