Why 2016 Could Be a Banner Year for Hollywood Studio Mergers and Acquisitions

CEOs from Tribune Media's Peter Liguori to John Malone say they're ready to make some moves as the future of networks such as WGN America, Starz, Lionsgate and Paramount remain uncertain.

This story first appeared in the April 1 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

Hollywood studio chiefs and entertainment industry CEOs appear to have dealmaking on their minds. Viacom CEO Philippe Dauman made another pitch at a Feb. 23 investor conference for a deep-pocketed investor to acquire a slice of Paramount Studios, and DreamWorks Animation CEO Jeffrey Katzenberg says he "fantasizes" about such a deal.

Tribune Media said around the same time that it would explore “financial and strategic alternatives,” including, but not limited to, “the sale or separation of select lines of business or assets, strategic partnerships, programming alliances and return of capital initiatives.” CEO Peter Liguori emphasized that "our current stock price does not reflect the full value of these assets.” Analysts have said the company could sell some assets, possible its 31 percent stake in Food Network or even its WGN America cable network or TV stations or even the whole company.

And media mogul John Malone continues to beat the drum about rolling up premium TV firm Starz with Lionsgate.

All of this could lead to what is already looking like a potential banner 2016 for mergers and acquisitions in the entertainment industry. Since Jan. 1, there have been eight deals worth $8.4 billion, according to data provider MergerMarket. That puts this year already within striking distance of the $9.3 billion of deals that the firm tallied in 2015 and the $10.9 billion racked up in 2014.

"By the end of the year, the dollar volume on deals could be pretty high in the media space," predicts MergerMarket's Ed Mullane. He expects deal momentum to build and says industry trends "will probably force companies to start doing some larger deals."

A big deal boost this year came from Dalian Wanda's $3.5 billion acquisition of Legendary Entertainment — a deal that could spur similar transactions from Chinese powerhouses like Jack Ma's Alibaba, according to analysts. Other deals during the past few months include Doha-based BeIN Media Group's purchase of Miramax, TV station group Sinclair's $350 million deal for the Tennis Channel and Raine Group's $100 million-plus investment in Ron Howard and Brian Grazer's Imagine Entertainment.

Film studio deal volume this year also seems set to hit a multi-year high when looking at figures from PricewaterhouseCoopers based on Thomson Reuters data. For 2015, PwC listed $521 million worth of studio deals, up from $420 million in 2014 and virtually zero in 2013. Just looking at Wanda's $3.5 billion Legendary deal alone, this year seems off to a flying start in comparison.

PwC’s broader category of film and content deals in 2015 amounted to an overall value of $1.68 billion, down from $3.60 billion seen in 2014 and 2013’s $500 million. According to the PwC data, 2012 marked a high in terms of film and content deals as Disney’s $4.1 billion acquisition of Lucasfilm boosted that year’s deal volume to $9.0 billion.

Bart Spiegel, PricewaterhouseCoopers' U.S. entertainment & media deals partner, says that, despite a slow fourth quarter 2015, there are bigger-picture reasons for deal activity in the sector, including a big global push for content.

“It is important for companies to make sure they have attractive content” that can be monetized across the ever-growing number of platforms, and the financial firepower to invest in it, he explains. “Companies are looking to make sure they are building out their portfolios as best as they can. And companies continue to evaluate their position in the digital landscape.” In that vein, Time Warner this year acquired DramaFever, which offers Korean dramas to U.S. audiences.

In some cases, weakened sector stocks, which have started to lead to some activist calls, can also be a deal driver, analysts say. Shares of publicly traded entertainment companies have been slammed this year on concerns about cord-cutting, ratings and affiliate fee trends, and that's made some buyout prices more attractive.

Analysts also believe there could very well be some major, high-profile acquisitions in the offing. There's already been speculation swirling that Rupert Murdoch could take another run at buying Time Warner; and Alibaba on March 9 signed a deal for a $3 billion five-year loan, which the e-commerce giant plans to use for acquisitions of companies within China and overseas. One of its biggest interests? Building out its online video business. Hello, Hollywood!

comments powered by Disqus