DIGITAL MEDIA

Destra is poised to divest the assets of its entertainment division following an extensive review of its operations, conducted by Lexicon Partners over the last four months.

The long anticipated results of the review, which was commissioned by Destra’s majority shareholder Prime in April, will be detailed to the market on Monday in conjunction with Destra’s full year 2008 results.

Destra executive chairman and Lexicon principal David Gordon confirmed yesterday that the board has decided to exit all of the businesses within the entertainment division during the current financial year.

However the confirmation was not news to the industry, as most major players and niche digital entertainment companies have been aware of Destra’s attempts to shed the assets for months. The entertainment assets of DestraVision include Magna Pacific, MRA Entertainment group and Visual Entertainment Group while DestraMusic includes Central Station, Rajon Distribution, the audio assets of MRA Entertainment and Destra Corp.

Interested parties have been reviewing the assets yet none of the discussions have led to a sale arrangement. It is understood that Lexicon had issued an expressions of interest deadline of July 31 for DestraVision and August 7 for DestraMusic.

Industry sources suggested that ASX listed Mercury Mobility were on the brink of securing the music assets however negotiations appear to have collapsed in the last week. Mercury Mobility head of content and marketing Paul Paoliello told Digital Media that discussions regarding a transaction had ceased. Paolliello, is a former Destra Music executive, operating its audio division in 2005 following the sale of his music label Big Records to Rajon/Destra.

Gordon denied that any assets were close to being sold or that any potential suitors had pulled out of discussions and also slammed media reports that a significant portion of jobs had been cut as part of the review. Gordon confirmed that there had been staff attrition taking place over the four months “but the implication that there has been a mass axing is not true. It’s just a beat up. “ He added that while the company had “elected to exit these businesses, there is no rush to do so,” and the assets may still be within the Destra group a year from now.

Destra also announced that further to its market guidance in June estimating EBITDA for the year ended 30 June of between $2.5M and $3.5M citing impairment charges, the company now advises that impairment calculations were complete resulting in impairment charges of approximately $69.5M for FY 2008. Destra attributed the charges to goodwill in the Entertainment division and includes write-downs of other specific assets such as intellectual property and investments.

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