Bollywood meets Hollywood with the marriage of Eros and STX – Entertainment

Indian film producer Eros International Plc merges with private US filmmaker STX Entertainment as part of a stock share agreement between Bollywood and Hollywood.

The combined company, Eros STX Global Corp., will be listed on the stock exchange and will have a valuation of more than $ 1 billion, including debt, according to people familiar with the details, who asked not to be identified because the matter is private. . New York-listed Eros shares jumped 77% and closed at $ 3.05 in New York.

This is a rare affair in an M&A market that is almost taken care of as leaders and investors grapple with the fallout from the pandemic.

Although discussions started six months ago, final terms have been worked out over the past few weeks over conference calls, with part of the Eros negotiating team from India. The transaction was virtually signed by an exchange of signature pages between lawyers, people said. Eros founder Kishore Lulla said his long-standing relationship and trust in his STX counterpart Robert Simonds, for whom his daughter was previously an intern, was key to reaching an agreement in unusual circumstances.

Ultimately, the pandemic underscored the importance of the agreement.

“I always believed that technology was going to change the studio model and that everything was going to go digital,” said Lulla, who will be co-chair alongside Simonds. “Covid has intensified this digital model.”

In the past four to six weeks, user time spent on the platform has jumped from 50% to 200%, said Lulla.

Read also: Bollywood Oscars canceled for coronavirus

Larger footprint

But the two companies have had difficulties over the years, and it is too early to say to what extent the combination will solve them. STX failed to find a winning formula at the box office, with modest recent artists like Brahms: the boy 2 and Gentlemen. Eros, on the other hand, has become the target of short sellers who have published reports of accounting irregularities. When the company recorded a sharp increase in UAE revenues in 2015, the reasons were vague, which worried investors.

Joining forces will give the two independent companies more leverage to compete with the larger studios, as trends sweeping through Hollywood have made it difficult for young players to grow. Between Comcast Corp.’s Universal Pictures, the combination of Walt Disney Co. and Fox Corp. film companies, and AT&T Inc.’s acquisition of Time Warner Inc., a trio of studios now owns and produces many of the most successful franchises well-known blockbuster films, including the universe of Marvel superheroes and DC Comics. The result is a small group of big movies increasingly dominating the box office.

The agreement will give the company a larger geographic footprint.

“My personal dream has always been to be a major supplier of premium content to the world in the markets that really matter – the United States, India and China – and that combination is all three,” said Simonds, who will become CEO of the company.

STX films include actress Amy Schumer I feel pretty and Jennifer Lopez Hustlers. The new company plans to release 40 feature films this year, as well as content for services such as Netflix, Hulu and Amazon.

The combined company will have $ 600 million in pro forma revenue for 2019 and $ 300 million in “highly predictable” future revenue from STX movies that have already been released. There will be approximately $ 50 million in operating synergies.

The company will be domiciled on the Isle of Man with a common headquarters in Maharashtra, India, and Burbank, California.

The deal comes less than two years after STX, backed by internet giant Tencent Holdings Ltd., ended its IPO plans.

TPG, Hony Capital and Liberty Global, the donors to STX, will provide some of the equity. The company will also have a $ 350 million credit facility led by JPMorgan Chase & Co.

Citigroup advised Eros on the agreement, while Gibson, Dunn & Crutcher provided legal advice. STX was advised by PJT Partners, Kirkland & Ellis being its legal adviser.

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