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Iwerks to Be Acquired by Canadian Firm

Merger: Burbank-based maker of large-screen attractions will be bought by SimEx in $2.2-million deal.

March 07, 2001|JERRY HIRSCH | TIMES STAFF WRITER

Iwerks Entertainment Inc., a maker of giant-screen theaters and theme park attractions, said Tuesday it will be acquired by a Canadian company for about $2.2 million in cash.

Although the value of the deal is small, Burbank-based Iwerks has been an influential company in the theme park and attraction industry, supplying the 3-D projection system used in the elaborate Terminator rides at Universal Studios parks in Hollywood and Florida.

Founded by the son of the animator who helped Walt Disney design the Mickey Mouse character, it also is the second-largest maker of large-screen, or 70-millimeter, theaters behind Toronto-based Imax Corp.

SimEx Inc., a Toronto-based simulator-ride company, will acquire Iwerks for 63 cents a share, which is more than double the Burbank-based company's closing price of 25 cents on Monday. On Tuesday, Iwerks closed up 19 cents at 44 cents in over-the-counter trading. Still, that's far from a one-time high of $120 a share, adjusted for a reverse stock split. The company went public in 1993. The acquisition is expected to close by June.

The deal gives SimEx access to Iwerks' simulator technology and its large-screen theater systems, said Michael Needham, a former venture capitalist and SimEx chief executive.

Large screens are taking on increasing importance in the theme park industry because they can supply a variety of thrills and cost less to update or change than traditional bricks-and-mortar theme park attractions.

Just last month Disney opened Soarin' Over California, an attraction at its new California Adventure theme park in Anaheim that uses large-screen technology to simulate a hang glider's flight. Disney planners are working on developing new versions of the ride for the company's other parks.

But where Disney will spend tens of millions of dollars on attractions, "the trick is to produce something that is financially sensible for the smaller amusement parks, science centers, zoos and other attractions we work with," Needham said.

A typical SimEx attraction--such as the Virtual Voyages ride it built for the Ruben H. Fleet Science Center at San Diego's Balboa Park--cost $1 million to $2 million, Needham said.

The merger also gives SimEx access to complimentary simulator technology. Iwerks' small systems are based on pods of seats that are programmed to move in tandem with film on the simulator screen. In the SimEx systems, the entire theater capsule moves.

Needham said that Don Iwerks, whose father, Ub Iwerks, was one of the first Walt Disney Co. employees, will join the SimEx board. The Iwerks company will retain its brand name and continue operations in Burbank. However, it will work closely with SimEx Digital Studios, the SimEx film division headquartered in Santa Monica.

SimEx has wanted to acquire Iwerks for at least four years, but Needham said he was unable to convince a series of chief executives who preceded current Iwerks CEO Gary Matus.

Don Iwerks is a former Walt Disney Imagineering executive who built film projection systems for Disney's theme parks and helped develop "Captain EO," the Disneyland 3-D short starring Michael Jackson. His work in film and at the theme parks helped Iwerks win a 1998 Oscar for lifetime technical achievement.

He left Disney to found his own company in 1986. But Iwerks' plans for a series of giant complexes with retail shops, restaurants and panoramic theaters called Cinetropolis centers derailed the company.

In October, Iwerks' auditors issued what is called a "going concern" opinion raising doubts about the company's ability to continue in business.

Losses of nearly $50 million over the last four years forced Iwerks to seek a merger partner. Most recently, Iwerks reported a loss of $184,000 in its second fiscal quarter on revenue of $6.8 million. The loss was just a tenth of the $1.8 million Iwerks lost in the same period a year earlier on $9.2 million in sales.

Although SimEx is a private company, Needham said it is profitable, earning just over $1 million Canadian dollars last year on sales of about $30 million.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Iwerks' Long Slide

Iwerks stock became public in 1993 and at one point traded above $120 a share, adjusted for a reverse stock split. In recent years, the company has racked up significant operating losses.

*

Iwerks, quarterly closes and latest

Tuesday, over-the-counter trading: 44 cents, up 19 cents

Source: Bloomberg New

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