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Lionsgate Buying Debmar-Mercury

Independent TV distributor Debmar-Mercury (South Park, for one) will become a wholly owned subsidiary of Lionsgate, an independent Canadian studio, in a deal believed to be worth $27 million, including the $5 million allocated for Debmar-Mercury to repay its debt.

According to industry sources, Debmar-Mercury, which already handles some Lionsgate product for the domestic TV market, had been in discussions on a sale with several studios, including Warner Bros. But they were said to have offered company principals Mort Marcus and Ira Bernstein less money and autonomy—effectively making them company employees—than did Lionsgate.

Marcus and Bernstein declined Wednesday to comment on interested parties or the price, but said they ultimately chose to go with Lionsgate because it promised the most money and latitude for the recently merged Debmar-Mercury to remain independent. The deal includes a provision allowing them to do business with other studios if Lionsgate passes on a project.

“They told us, ‘You guys can be the Miramax of syndication’ and gave us the money to grow the company,” Marcus says. “It’s a good marriage and the right time to do a deal,” adds Bernstein.

For Lionsgate, the deal extends its relationship with actor, writer, director and producer Tyler Perry (Diary of a Mad Black Women, Daddy’s Little Girl) from feature film and video to television.

Marcus and Bernstein would not comment on speculation that they are closing in on a fall 2007 major-market station group deal with either Fox or Tribune to produce 100 first-run episodes of Perry’s sitcom, House of Payne.

Debmar-Mercury has been testing a two-week strip run of Payne in various key time periods on different station groups. The test markets included New York, Chicago, Philadelphia, Houston, Baltimore and Raleigh, N.C., and, so far, the results have been positive.

With Tribune grabbing the most recent syndicated comedy offerings from major studios, Two and a Half Men and Family Guy, and given a dearth of other major off-network sitcoms on the horizon, the station groups are now believed to be looking at a return to the first-run sitcom strategy. That was popular in the 1980s when Tribune employed a checkerboard strategy of different comedies in access on week nights.

Debmar-Mercury also distributes Comedy Central’s South Park, Lionsgate’s The Dead Zone; Sci Fi Channel’s Farscape (produced by Hallmark Entertainment and the Jim Henson Co.); and two feature film packages from Revolution Studios and Lionsgate.

The deal will allow the distributor to exploit the international and video businesses run by Lionsgate, which recently moved into international feature film and library distribution through the October 2005 acquisition of U.K.-based distributor Redbus (subsequently renamed Lionsgate U.K.).

Lionsgate, meanwhile, gains the capacity to syndicate its own television programming and feature film packages, while creating a new television distribution revenue stream from third-party franchise properties.

“We again have the opportunity to combine our resources with a culturally similar, entrepreneurial company that is a leader in its market segment and whose principals we know well,” says Lionsgate CEO Jon Feltheimer.  “With our fiscal 2007 slate of nine prime time television series, the acquisition of Debmar-Mercury’s television distribution capabilities across new and traditional media outlets is a natural growth opportunity for our content business.”

Feltheimer notes that the acquisition continues to further Lionsgate’s strategy of broadening its distribution footprint.

Debmar-Mercury is already preparing the syndication launch of The Dead Zone, which has just debuted in its fifth season on USA Network.