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Tussle over a sweetheart

Strawberry Shortcake is the focus of a fight between American Greetings and licensing firm DIC.

June 21, 2008|Meg James | Times Staff Writer

This sure isn't Strawberryland.

On Friday, American Greetings Corp., which owns the rights to the whimsical icon of the 1980s -- the rag-doll-like Strawberry Shortcake -- sought to block the sale of its licensing partner, Burbank-based DIC Entertainment Holdings Inc., to a privately held Canadian firm.

An Ohio judge granted American Greetings' request for a temporary restraining order to halt the sale of DIC (pronounced Deek) to Cookie Jar Group, a children's entertainment and publishing company based in Toronto. American Greetings alleged in a suit filed Friday that a 2001 agreement with DIC prevented the firm from transferring the rights to Strawberry Shortcake without its consent.

In the last four years, according to DIC, Strawberry Shortcake has generated nearly $3 billion in retail sales. DIC produces a Saturday-morning series for CBS, starring Strawberry Shortcake, her pink cat Custard, dog Pupcake, sister Apple Dumplin' and friends Huckleberry Pie and Ginger Snap, who live in Strawberryland.

"We expected this, and frankly we don't consider that it has any merit," Andy Heyward, chief executive of DIC Entertainment, said of American Greetings' lawsuit. "We are prepared to move forward with the merger, and we are moving forward."

DIC receives the bulk of its revenue from Strawberry Shortcake and a wide variety of other children's and consumer brands, including Eloise, Mommy and Me, and McDonald's. DIC reported a net loss of $36.6 million on revenue of about $75 million in 2007. The company's stock trades on the AIM market of the London Stock Exchange.

Under the proposed deal, Cookie Jar would acquire DIC's stock for $0.7153 a share, or a total of $31.5 million. It also agreed to assume $42 million in outstanding debt and pay $14 million in transaction fees. Upon closing, DIC would become a division of Cookie Jar.

Only two years ago, DIC was worth considerably more. But the firm, which last year acquired a European licensing company, has struggled recently in a field that is dominated by three giant players: Walt Disney Co. with its Disney channels; Viacom Inc., which owns Nickelodeon; and Time Warner Inc., which owns the Looney Tunes and Hanna-Barbera characters and the Cartoon Network.

"It's become increasingly difficult to compete. It's not a favorable environment for a small, entrepreneurial company," said Heyward, who would receive a five-year contract to continue to manage DIC. The company employs about 220 people.

Toper Taylor, president of Cookie Jar Entertainment, said the acquisition of DIC would add a valuable licensing and merchandising business to Cookie Jar's portfolio. It also would unite longtime rivals in the kids' entertainment business.

"We spent more than a decade arm-wrestling each other for network [time] slots," Taylor said. "But we've always engaged in mutual admiration." DIC has changed hands several times, including being acquired and reacquired by Heyward himself.

The company began as a French firm in 1971. Heyward first purchased it in 1986. He sold it in 1993 to Capital Cities/ABC Inc., which later was taken over by Disney. In 2000, Heyward, with the help of Bain Capital, bought back the business. He then acquired Bain's stake in 2004, and in 2005 he took the company public on the AIM in London.

In a regulatory filing Friday, DIC said that last summer it decided to "explore strategic transactions." Among the potential suitors: American Greetings. However, in its lawsuit, the Cleveland company said that though it had considered buying DIC, it concluded that it was "not the right fit."

Last month DIC and Cookie Jar entered into exclusive negotiations.

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meg.james@latimes.com

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