NEW YORK, NY. & SACRAMENTO, CA. (Top40 Charts/ Orchard Enterprises) - The Orchard Enterprises Inc., a leading global digital distributor and marketer of music, and
Digital Music Group, Inc. (formerly NASDAQ symbol 'DMGI'), a content owner and leader in the digital distribution of music and video catalogues, today announced that the two companies have completed their previously-announced plans to merge. The combined company (the 'Company') will begin trading on November 14, 2007 on the NASDAQ Global Market under the symbol 'ORCD.' Current Orchard president and chief executive Greg Scholl will lead the combined company as CEO, and headquarters will be at The Orchard's offices in New York City. It is anticipated that the DMGI business will rapidly be integrated with The Orchard. The combined business will all be conducted under the name 'The Orchard.'
The Company controls a substantial catalogue of entertainment assets, with over one million music recordings available for sale and thousands of hours of television, film and video programming. It is a market leader for independent distribution of digital music and video, with powerful marketing, promotion, distribution and operations capabilities throughout the world. The Company serves artists, labels, music publishers, television, film and video library owners and other rights holders by developing new and inventive ways to market and sell digital content. In addition, for digital and mobile retailers, advertisers, consumer brands and technology companies, the Company provides a single point of access to one of the world's largest and highest quality digital content catalogues that spans global superstars and niche and specialty artists.
'The Orchard and DMGI create a powerful combination in the rapidly growing digital media industry,' said Mr. Scholl. 'DMGI adds exciting new artists and record labels to The Orchard's already extensive music catalogue, and offers an immediate and significant leadership position in the digital distribution of independently owned TV, film and video content.'
Mr. Scholl added, 'We anticipate rapidly integrating the companies to reduce costs aggressively. At the same time, we anticipate driving revenue through proactive and productive outreach to DMGI's clients to ensure they take full advantage of the increased distribution and more sophisticated retail sales and marketing capabilities that The Orchard offers.'
At a special meeting held today, the merger and a reverse stock split were approved by DMGI stockholders. The reverse split was necessary to maintain a NASDAQ Global Market listing, and the Board of Directors today authorized a one-for-three reverse split to be effective on November 14, 2007, when the stock will begin trading under the symbol 'ORCD.'
For legal purposes, DMGI is acquiring The Orchard, although the combination will be accounted for as a reverse merger with The Orchard deemed to be the 'acquiror' for accounting and financial reporting purposes. As consideration in the business combination, DMGI has issued (or reserved for issuance pursuant to deferred stock awards) 3,021,364 shares of common stock on a post-split basis (or 9,064,091 shares on a pre-split basis) and 448,833 shares of convertible preferred stock to the shareholders of The Orchard, including its principal shareholder Dimensional Associates, LLC. Each share of preferred stock is convertible into, and has voting rights equivalent to, 3.33 shares of common stock on a post-split basis (or 10 shares of common stock on a pre-split basis), with a liquidation preference of $55.70. After closing of the merger, the shareholders of The Orchard collectively own approximately 60% of the Company's voting shares outstanding (assuming conversion of the preferred stock and including shares reserved for issuance under deferred stock awards).
As contemplated by the merger agreement and set out in DMGI's proxy statement, Greg Scholl, Viet Dinh, Danny Stein and Michael Donahue have been appointed to the Company's Board of Directors, and will serve along with David Altschul, Terry Hatchett and Clayton Trier, who remain Directors of the Company.
Barth Ballard has relinquished responsibilities as interim CEO and has agreed to serve in a transition role during the integration of the companies, after which time he will resign from the company. Richard Rees, who agreed in September to serve in an interim role as Vice President of Business Development ahead of the finalized merger agreement, has submitted his resignation, effective today. Tuhin Roy, who served as Chief Strategy Officer of DMGI and President of DMGI's subsidiary Digital Rights Agency, has submitted his resignation, effective today. DMGI's Digital Rights Agency subsidiary brand (along with the Psychobaby, DMI and Digital Music Group brands) will be integrated into The Orchard, and the company will retain one brand and one identity as The Orchard.
