Deutsche Entertainment AG chief Peter Schwenkow and international promoter Marcel Avram appear to have reached an amicable way to end their association in the Swiss-based Entertainment One.
Schwenkow isn’t revealing all the details of their agreement, but it seems the original terms of Avram’s departure from Germany-based DEAG have changed.
Last October, when it was made public that Avram was leaving, Schwenkow waived a two-year non-compete clause in return for a guarantee that future co-operations between the two would be guaranteed to yield a “two-digit million euro business volume” over the same two-year period.
Explaining a note on a DEAG ad hoc press release that accompanied some 2005 figures showing a year-on-year profit drop, all down to extraordinary items, Schwenkow told Pollstar that a sentence referring to “discontinued operations” that includes “the business of the Swiss entity Entertainment One” actually means that Avram’s two-year contribution commitment has now been waived in return for him letting go of his 30 percent holding.
Now, Entertainment One is wholly owned by DEAG and Avram is free to pursue his own business interests through his Swiss-based company.
Schwenkow said he is shifting Entertainment One to Munich because it’s more tax-efficient than DEAG owning a company outside of the European Union. It will concentrate on DEAG’s classical music productions.
The financial aspects of the deal are hard to figure. In 2004, the DEAG management board announced it intended to float between 15 and 19 percent of Entertainment One in order to “generate additional liquidity” to promote more tours.
All the shares would have come from DEAG’s own holding, although the company would have still retained 51 percent. Avram didn’t want to sell any of his own stock.
“The company is happy that I don’t want to sell any of my shares and so I’m happy for it to put up some of its own,” he said at the time.
Schwenkow said he was expecting to get somewhere between 5 and 10 million euros for what amounted to a little less than a fifth of Entertainment One.
It’s still not public why the float was never launched. Schwenkow parries questions about the share price he wanted, which roughly put Entertainment One’s value on a par with the U.K.’s
“The stock market loves high valuations,” he replied.
However, rather than valuing Entertainment One at more than US$45 million, Schwenkow appears to have given up Avram’s euro 2 million (US$2.42 million) in exchange for his 30 percent of the company. That would appear to value the whole business at closer to US$7.26 million.
Although the float never happened, and DEAG didn’t reap close to US$10 million, Schwenkow did secure a war chest of up to US$30 million in the form of a credit line from U.S.-based Octave Entertainment Fund Ltd.
After declaring 2004 profits of about US$5.9 million, which was mainly the result of a one-off tax windfall, Schwenkow’s now happy to see trading profits for 2005 in line with expectations at about US$2.5 million.
Although his company has had a rocky time from the German business press, particularly Boerse Online and Euro Am Sonntag, he’s confident he’s also got good news to spread. The 2006 ticket sales from shows being promoted by Carlos Fleischmann (CT Creative Talent), Johannes Wessels (Music Pool) and Klaus Bönisch (KBK Konzerten), along with an expanding classical music division, should see 2006 revenues and profits increase by close to 50 percent.
Andre Bechir’s Swiss-based Good News, which Schwenkow refers to as “our pearl” because it has “the highest average annual EBIT of all our promoters,” will also benefit from having a full year’s worth of concerts in the recently revamped
– John Gammon