FOR IMMEDIATE RELEASE
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For Iwerks Entertainment, Inc.
Contacts: William Battison Joseph Kessler
Executive Vice President Bozell Sawyer Miller Group
Iwerks Entertainment (310) 442-2532
(818) 840-6111
For Showscan Entertainment, Inc.
Contacts: W. Tucker Lemon Steve Stern
Sr. Vice President & Stern & Company
General Counsel
Showscan Entertainment (310) 442-8414
(310) 558-0150
IWERKS AND SHOWSCAN ANNOUNCE
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MERGER AGREEMENT
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Burbank, CA - August 5, 1997 - Iwerks Entertainment (NASDAQ:IWRK) and Showscan
Entertainment (NASDAQ: SHOW) today announced that they have signed a definitive
agreement to merge. The combined company, which will bring together the two
largest motion simulation companies, will be the largest provider of ride
simulation entertainment attractions and software in the world.
The transaction calls for each share of Showscan common stock to be converted
into 0.85 of a share of Iwerks common stock. Outstanding Showscan convertible
preferred stock will be exchanged for Iwerks common stock at the 0.85 ratio on
an as converted basis. Iwerks expects to issue approximately 5.62 million
shares of Iwerks common stock in the merger (plus shares issuable upon exercise
of outstanding Showscan options and convertible notes), resulting in an
estimated transaction value of approximately $27.4 million (based upon a
closing price of Iwerks common stock on the Nasdaq National Market on August 4,
1997 of $4.875 per share). The transaction will be accounted for as a pooling
of interests, after which Showscan will become a wholly owned subsidiary of
Iwerks.
Completion of the merger is subject to stockholder approval, as well as other
customary closing conditions. The transaction is expected to close in the
fourth calendar quarter of this year.
As a result of the merger, the combined company will have:
- Over 160 simulation theaters, which is the largest installed base of
simulation theaters in the world;
- Pro forma recurring film licensing revenues of approximately $12
million, based on Iwerks' and Showscan's fiscal 1997 results;
- An expanded presence in the important Asian market, where Showscan
has a strong installed base of 26 theaters;
- Distribution rights to an industry-leading library of more than 60
ride simulation titles, including the critically-acclaimed DEVIL'S
MINE RIDE and COSMIC PINBALL from the Showscan 28 title library and
DINO ISLAND and SECRETS OF THE LOST TEMPLE from the Iwerks 40 title
library; and
- Showscan's interests in owned-and-operated attractions in Los Angeles
at Universal City Walk and in London at the Trocadero, among others.
Roy A. Wright, Iwerks' Chairman and Chief Executive Officer, will be Chairman
and Chief Executive Officer of the combined company.
Wright said, "This significant strategic move creates a company that is the
strong leader in the ride simulation market. The creative and technical skills
of the combined company will help us better serve and support our existing
networks via premium software and technical innovation, while strengthening our
marketing and sales effort to continue the growth of the market overall.
"This merger also provides the combined company significant opportunities to
realize efficiencies and synergies available by operating with a combined
corporate overhead. We expect to realize significant cost savings in the
combination, particularly in the areas of general and administrative expenses
as well as marketing and selling expenses."
Dennis Pope, President and Chief Executive Officer of Showscan, said, "This
transaction allows Showscan stockholders to be part of the largest motion
simulation entertainment company in the world. It is another step in bringing
the remarkable promise of simulation entertainment to fruition.
"The combined company will be the strongest, broadest and most versatile player
in the industry. Existing and potential customers of both companies will win
because they will not have access to the broadest selection of software and
technology options, as well as the exemplary service and support the combined
company will provide."
In connection with execution of the definitive merger agreement, certain
stockholders of Showscan, holding approximately 1.2 million shares of capital
stock, have granted Iwerks an irrevocable proxy to vote their shares in favor
of the merger at a forthcoming meeting of Showscan's stockholders. In
addition, certain stockholders of Iwerks, holding approximately 1.6 million
shares of Iwerks common stock, have granted Showscan an irrevocable proxy to
vote their shares in favor of the merger at a forthcoming meeting of Iwerks'
stockholders. In
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addition, three members of Showscan's board of directors will join the
combined company's board of directors.
Showscan Entertainment, based in Culver City, California, was founded in 1984
to commercially exploit the patented Showscan(TM) film process created by
Douglas Trumbull and Paramount Pictures. In 1984, Showscan created the first
major motion simulation entertainment attraction at the CN Tower in Toronto,
Canada. Showscan then developed a motion simulation theater product using the
hyper-realistic Showscan process which was marketed to theme parks and
entertainment centers worldwide. Showscan has long-term multi-theater
installation agreements with United Artists Theatre Circuit, Imagine Japan,
King's Entertainment Co. (Taiwan) and Reality Cinemas (Australia).
Today, Showscan is an international leader in the production and exhibition of
exciting movie-based entertainment attractions shown in large-screen, special-
format theaters worldwide. Showscan's simulation and specialty theaters are
open or under construction in 24 countries around the world, located in theme
parks, motion picture multiplexes, expos, world's fairs, resorts, shopping
centers, casinos, museums and other tourist destinations. Showscan owns and
operates its own theaters, and operates others in partnership with leading
entertainment companies around the world.
Iwerks Entertainment, Inc. is the world's leading producer of innovative, high-
tech, multi-sensory experiences such as ride simulation, giant screen theaters
and other immersive attractions for the location-based entertainment (LBE)
market. Founded in 1986 in Burbank, California, Iwerks Entertainment has
installed over 270 attractions worldwide. Clients include Paramount Parks, Six
Flags Theme Parks, Walt Disney Theme Parks, AT&T, Hoyts Corporation, and Dave
and Buster's.
Note: With the exception of the historical information, the matters discussed
above include forward-looking statements that involve risks and uncertainties.
Certain important factors could cause actual results to differ materially from
those indicated in the forward-looking statements. The ability of the combined
company to achieve cost savings and revenue growth will depend on its ability
to quickly and effectively merge the operations and the product lines and
manage the resulting larger operations. Other factors impacting future results
include revenue, costs of sales and the ability of the Company to maintain
pricing at a level necessary to maintain gross profit margins, the level of
selling, general and administrative costs, the performance by the Company under
its existing purchase contracts and the ability to obtain new contracts, the
success of the Company's owned and operating strategy, the ability of the
Company to find additional sponsors for its Reactors(TM) or alternative sources
of revenue, the ability of the Company to identify and successfully negotiate
arrangements with joint venture and other strategic partners, the success of
the Company's film software, the effects of technological developments,
competition, general economic conditions and acts of God and other events
outside the control of the Company.
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