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The Chernin Group co-founder Peter Chernin is rolling up three content studios into one new mega-project, backed by $800 million in financing from two private equity firms.
Chernin is launching The North Road Company, a global multi-genre film and TV studio that will include ownership of Chernin Entertainment (Ford v Ferrari, New Girl) and Words + Pictures (the ESPYs), the venture launched by former ESPN executive Connor Schell, which was backed by Chernin.
But North Road is also in the market for acquisitions, with the first being the U.S. assets of Red Arrow Studios (Love Is Blind, The Circus).
The purchase price for Red Arrow Studios’ U.S. assets was $200 million, according to a source familiar with the deal. Red Arrow was owned by Germany’s ProSiebenSat.1 Group, which had been looking at potential deal opportunities since before the pandemic.
“I continue to believe that there will be ongoing growth in content spending and that there is a big opportunity for a company like ours to grow and capitalize on that,” Chernin tells The Hollywood Reporter. “We are looking to grow, that is the only thing we are focused on, and I believe we will grow in two ways: We will grow by giving more capital to the existing companies so they can grow even faster, and by acquiring great companies.”
North Road has secured $800 million in financing, including $300 million in debt from Apollo, through its managed affiliates, and $500 million from Providence Equity Partners, which has been a longtime partner of TCG. North Road is being valued at more than $1 billion including the debt and equity financing, a source says.
That financing will be used to bolster the three current studios and also on strategic M&A, Chernin says, noting that the company as already composed is “highly profitable.”
“We would look at, first and foremost, the companies with the potential to grow most rapidly, and then secondly we would look at quality,” Chernin says, when asked what he’s looking for in potential target companies. “We obviously believe, and we may or may not be right, that we have a track record and a history of producing high-quality content … And we are looking to buy best-in-class companies both from a growth-potential perspective and a quality perspective.”
“We are trying to create a pure-play content company, we are not looking to buy brands,” he adds.
Chernin will be chairman and CEO of North Road, with leaders from the production companies overseeing different parts of its business. Jenno Topping will continue to serve as president of Chernin Entertainment; Schell, in addition to overseeing Words + Pictures, will oversee nonscripted content at North Road; Jan Frouman will be president of North Road, with a particular focus on international expansion, joined by Kristin Jones, who will be president of international TV. Longtime TCG partner Jesse Jacobs will be a board member at North Road.
Also: Chris Coelen (Kinetic Content), Ken Druckerman and Banks Tarver (Left/Right), Stephanie and Rasha Drachkovitch (44 Blue Productions), Dirk Hoogstra (Half Yard), and Chris Dorsey (Dorsey Pictures) will continue to lead their production banners within Red Arrow.
But North Road will really home in on two key growth areas that Chernin says will be poised for expansion in the coming years: international programming, and unscripted and documentary fare.
“International because if you look at the big streaming players, Netflix Disney Amazon, there is not that much growth for them in the U.S., so they are really focused internationally,” Chernin explains. “Nonfiction because it is the best way to have some impact on their cost escalations. High-quality documentaries and reality is so much more cost effective.”
North Road’s creation comes amid increasing demand for content from streaming services and linear TV channels around the world, and with the theatrical film business appearing to be in position to recover from the COVID-19 pandemic closures.
It’s a strategy also being pursued by another pair of veteran entertainment executives: Kevin Mayer and Tom Staggs, who formed Candle Media (backed by Blackstone) and have acquired or invested in production studios like Hello Sunshine and Moonbug Entertainment.
Chernin says that despite consolidation of major players, the demand for third-party content is still likely to increase in the coming years.
“I think if anything there is more growth to be had as a third party, because one of the things that is meaningful here, is that if you think there is a global increase in content spending, historically the three largest content producers in the world, which were Warners, Fox and Disney, are all in some ways going away,” Chernin says. “Warners is almost exclusively producing for HBO, Fox is gone and Disney only produces for themselves. So while the world of content spending is increasing, the traditional larger suppliers are going away, that felt like a big opportunity to us.
“So not only am I not concerned about consolidation, I think it creates more opportunities for us, because there is more and more need for this stuff, and the number of suppliers is dwindling,” he adds.
North Road was advised in the deal by Centerview Partners and Moelis & Company; legal representation was provided by Gibson Dunn & Crutcher. Red Arrow was advised by Morgan Stanley. Words + Pictures was advised by Sidley Austin.
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