Koch execs will stay in place.

ROW Entertainment Income Fund, the Canadian firm that owns the 100-unit CD Plus retail chain, has signed a definitive agreement to acquire Koch Entertainment for about $80 million. ROW also owns wholesalers Record On wheels, Zing Distribution and Video One,

Expected to close June 1, the deal is subject to regulatory approval in Canada, where Markham, Ontario-based ROW is a publicly traded company. If completed, it will create an organization that last year had a combined revenue of about $545 million.

According to a company announcement, ROW will fund the acquisition by issuing $70 million (Canadian) in company stock, specifically 7 million shares priced at $10 each. The rest is to be paid from a $13.5 million increase in its bank facility, supplied by Scotiobank. ROW shares closed today on the Toronto exchange at $10.50 Canadian.

The payment will consist of $55 million in cash, 2.4 million shares of ROW, and the assumption of $5.1 million in Koch debt. The 2.4 million shares will make Michael Koch, the founder and CEO of Koch Entertainment, the second largest holder in ROW, sources say.

In addition to Koch Records and Koch Entertainment Distribution, Koch owns a 75% interest in DRG Records, and Canadian independent distributor Koch Canada. Michael Koch will remain CEO, and other key Koch executives are expected to stay in place. Koch will report to Darren Throop, president/CEO of ROW Entertainment.

Michael Koch tells Billboard.biz that the deal will benefit both companies, giving ROW a U.S. platform. From the Koch Entertainment perspective, "It will keep the company independent, self sufficient, vibrant, and finally give us access to the capital markets. If the right acquisition comes along, [ROW and Koch] will be able to make that move," he says.

While there are synergies to be realized in Canada since both companies run wholesale operations, "we will figure out what shape it will take," says Koch. "There is a real fit between what we have and they have, but exactly how that will be done hasn't been determined. What has been determined is nobody in Koch will lose their job, either here or in Canada."

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