Entertainment One Income Fund, the company that owns Koch Entertainment, has agreed to be acquired by Marwyn Investment Management LLP, a London-based private equity firm. The deal calls for unitholders of Entertainment Once Income Fund, which trades on the Toronto Stock Exchange, to receive about $3.60 Canadian ($3.08) per share. In addition, Marwyn will assume C$68 million ($58.4 million) in company debt, which values the company at about C$188 million Canadian ($161.3 million).

Entertainment One management, including CEO Darren Throop and Koch CEO Michael Koch, are expected to retain an ownership stake in the new company.

According to a press release, the C$3.60 represents a 33% premium over the closing price of the units of Entertainment One on Tuesday, February 13, 2007 and a 46% premium over the 20-day volume weighted average price ending February 13, 2007. But that also represents a 64% decline from the C$10 (at the time $7.90, now $8.57) valuation for each unit of the 2.4 million shares that Koch received when he sold his company to Entertainment One Income Fund, then called ROW Entertainment Income Fund.

The deal, which is subject to approval of regulatory agencies and shareholders, is expected to close in March. If the deal is completed, the company is expected to trade on the AIM component of the London Stock Exchange.

"This is welcome news because it will put us into a position to finally make acquisitions," Koch says. The new owners reportedly want to triple the size of the company within three years.

In addition to Koch, Entertainment One consists of its Canadian wholesale operation, formed out of the merger of Record On Wheels and Video One, which operates under the parent company name , and its Canadian retail chain, CD Plus.

In its most recent fiscal filing, the company reported a loss of C$1.46 million ($1.25 million) or 51 cents (44 cents) a unit, on sales of C$116.2 million ($99.7 million) in the fiscal third quarter ended Sept. 30, 2006. In the corresponding period of the prior year, the company reported a C$2 million loss ($1.7 million), or 71 cents (61 cents), on sales of C$143.6 million ($123.2 million). Although sales are down for the quarter, overall sales through the first nine months of the fiscal year were up 10.3% to C$365.5 million ($313.7 million). For that period the company reported a C$2.3 million loss ($2 million).