Troubled streaming and DVD distribution business Quickflix has struck a deal with rival service Presto to become a reseller of its content.
Today’s deal means Quickflix’s streaming offering will now be Presto content, but it will maintain its own pay-per-view movie and TV offering, and DVD business.
However, Mumbrella understands the deal has been structured to avoid triggering a warrant held by rival streaming service Stan as part of its shareholding in Quickflix.
Stan’s parent company StreamCo, a joint venture between Nine Entertainment Co and Fairfax Media, last year bought 83m preference shares in Quickflix from HBO, which included a warrant which sees Stan entitled to a $10.5m payment in the event of a “liquidation event” or 51 per cent change of ownership.
Quickflix only had a market capitalisation of $1.8m when it was placed into a trading halt yesterday, ahead of announcing the deal this morning.
Presto is a joint venture between Seven West Media and Foxtel.
According to Quickflix’s own annual report Stan’s warrants would be triggered if there was “a disposal of substantially all of the company’s assets, a merger or takeover, a person other than the shareholder acquiring a voting power of more than 51 per cent in the company, or any change in the majority of the members of the board of directors unless the replacement directors were nominated by the majority of the company’s board.”
Comment is currently being sought from Presto, Quickflix and Stan.
In the statement announcing the deal Quickflix CEO Stephen Langsford said: “We are very pleased to enter an agreement with Presto, backed by Australia’s largest entertainment company, and the number one free-to-air broadcaster.
“Streaming is taking off and this agreement will significantly bolster our content offering for existing and future Quickflix customers whilst improving our overall operating economics. ”
Stan, however, may still be able to contest the deal by arguing it is in breach of corporation laws that protect the rights of minority shareholders. The 10m convertible note was created after US TV giant HBO pumped $10m into Quickflix during a cashflow crisis in 2012.
In its most recent report to the market last month Quickflix’s accounts showed the company is losing around $850,000 a quarter, with just $1.26m in cash on hand.
As Mumbrella revealed last year, StreamCo originally bought the stake in Quickflix because of the warrant as a move to block the troubled streaming player from being bought by US streaming giant Netflix.
Updated: 12.14pm: Quickflix CEO Langsford this afternoon refused to comment on whether the deal had been deliberately structured around the Stan warrant telling Mumbrella: “The deal has come together because it’s good for both parties and especially good for customers”.
The languishing Quickflix share price has surged 200 per cent on news of the deal to 0.003 cents, lifting its market capitalisaiton to $5.45m