STX Entertainment CEO Bob Simonds notified staff on Friday that the company will merge with Indian film studio Eros International. The six-year-old indie studio scored its biggest hits with 2016’s “Bad Moms” and last year’s “Hustlers” but has mostly struggled at the box office
“Today marks an important and exciting day for our company. I’m very happy to let you know that we have just announced an agreement to combine forces with Eros International, the leading Indian film studio and OTT platform driving Bollywood,” Simonds wrote. “Eros is simply the most important film company in India. After the transaction closes, expected by the end of June, the combined company will be called Eros STX Global Corporation and will trade on the NYSE, where Eros is traded today.”
The two companies entered into a definitive stock-for-stock merger agreement that will also come with a revamped capital structure, which includes $125 million of incremental equity from new and existing STX Entertainment equity investors, including TPG, Hony Capital and Liberty Global; superior liquidity and a robust balance sheet including a $350 million JP Morgan-led credit facility.
Eros International is an Indian entertainment company that acquires, co-produces and distributes Indian films across cinema, TV and digital methods. Eros was the first Indian media company to list on the New York Stock Exchange, and boasts an extensive library with more than 3,000 films. The company also owns the rapidly growing streaming platform Eros Now which has rights to over 12,000 films across Hindi and regional languages.
TheWrap reported last summer that STX was scouring for a cash infusion or a potential buyer. The studio had been hoping for an initial public offering in Hong Kong back in 2018, but ultimately had to drop its plans due in part to volatile market conditions.
STX launched in 2014 with a $1 billion capital investment, and last March it raised an additional $100 million from existing investors, who include private equity firm TPG Growth, Chinese conglomerate Tencent, Chinese fund Hony Capital and John Malone’s Liberty Global. The major lenders include JP Morgan, East-West Bank and others. (Multiple individuals told TheWrap at the time that the studio burned through that cash, even while seeking to reduce expenses.)
In addition to the newly combined company’s $125 million of incremental equity, management said it will boast a strong liquidity position at close with $264 million of pro forma net debt, $195 million of pro forma cash balance and $120 million of available revolver capacity as of Dec 31, 2019.
“This company will be financially strong and uniquely positioned to compete immediately thanks to its global footprint, strong revenue and recapitalized balance sheet, including a large new equity commitment,” Eros International CEO Kishore Lulla said in a statement. “These significant investments and no meaningful debt maturities in the near-term enable the company to pursue strategic investments in key growth areas, including traditional and digital distribution, film acquisition, TV production and development of original episodic content.”
Lulla will serve as executive co-chairman of the combined company alongside Simonds, who will also hold the role of CEO. Andrew Warren will be the company’s CFO, with Rishika Lulla Singh and Noah Fogelson as co-presidents, and Prem Parameswaran as head of corporate strategy. The company with be headquartered in both Mumbai, Maharashtra, India and Burbank, Calif.
The companies expect the deal to close in the second quarter of 2020, and anticipate roughly $50 million of operating synergies across global operations.
Citigroup Global Markets Inc. is serving as financial adviser to Eros International and Gibson, Dunn & Crutcher LLP is serving as its legal adviser. PJT Partners is serving as financial adviser to STX Entertainment, and Kirkland & Ellis LLP is serving as its legal adviser. JP Morgan is serving as administrative agent under the senior credit facility.
Read Simonds’ full email to STX staff:
Dear STX Family,
Today marks an important and exciting day for our company. I’m very happy to let you know that we have just announced an agreement to combine forces with Eros International, the leading Indian film studio and OTT platform driving Bollywood. Eros is simply the most important film company in India. After the transaction closes, expected by the end of June, the combined company will be called Eros STX Global Corporation and will trade on the NYSE, where Eros is traded today. Together with Eros, we will realize our ambition to be a global powerhouse in entertainment, digital media and OTT. You can find a copy of the press release we issued here.
The combination will create the first independent media company with the expertise and creative cultures of Hollywood and Bollywood, while also leveraging the important inroads both companies have made into the Chinese market. Together we will have the relationships, management expertise and resources to create new content addressing the largest and most attractive global markets and will be backed by some of the most sophisticated investors in the media space.
As some of you already know, Eros has the largest library of Indian films with 3,000 titles and its OTT platform Eros Now is the leading SVoD platform for Indian content with 12,000 digital rights. The combined company will collaborate with key partners like Apple, Amazon, Microsoft NBCUniversal and Google/YouTube, and continue the our cost-effective, star-driven development, production and distribution models each company is known for today. We couldn’t be more excited about what the future holds.
The combined company will be led by executives from both companies. I will serve as Co-Chairman and Chief Executive Officer of the new company alongside Eros International’s current CEO, Kishore Lulla who will be the Executive Co-Chairman. Kishore is a giant in the Indian media world and has played a key role in shaping the country’s entertainment market for decades. Andy Warren will be the CFO of the combined entity. I’m also thrilled to announce that Noah Fogelson will serve as Co-President of the new company, alongside Rishika Lulla Singh, who currently serves as Chairman of Eros Digital. The combined company will be headquartered in both Burbank and Mumbai.
This combination is truly an example of two great companies coming together to create a powerful force in the global entertainment space. With this new capital and our global film and digital businesses we are well positioned to create and distribute content globally, that will allow audiences to consume our premium content when, where and how they prefer.
As always, thank you for your continued focus on the exciting work we do. This news is due in no small part to the incredible work and dedication that each of you contribute to our company every day. As we expand into the most important markets around the world, I’m excited to see what our team is capable of achieving.
Please join us for a company-wide call on Monday. A calendar invite will be sent out with details. If you have any questions, please reach out to me.
Thank you,
Bob