Colony Capital Reportedly Exploring Stake in Legendary Entertainment

Bloomberg
Colony Capital chairman Tom Barrack

Saudi Arabia's Public Investment Fund also has shown interest in investing in Legendary via a new fund Colony would set up to execute the deal, according to Bloomberg.

Tom Barrack's Colony Capital is in talks to purchase a minority stake in Legendary Entertainment, the Burbank-based film and TV company owned by Chinese conglomerate Dalian Wanda Group, according to a report published Sunday by Bloomberg

The investment would value the mini-studio, which most recently released Godzilla: King of Monsters and Pokemon Detective Pikachu, at significantly less than the eye-popping $3.5 billion Wanda paid for it in January 2016.

Any deal would signal a return to entertainment investment for Colony, which purchased Miramax from the Walt Disney Company in 2010. The investment group sold that asset to Qatar-based BeIN Media Group in 2016.

Representatives for Legendary declined to comment and Wanda did not immediately reply. 

Colony's interest in Legendary stems from its past relationship with the studio's current CEO, Joshua Grode, who advised Colony on the Miramax deal back when he was still an attorney. Grode later advised on the landmark sale of Legendary to Wanda, eventually stepping in to lead the studio after the departure of founder Thomas Tull. 

Colony is looking to set up a new fund called Colony Media Partner to execute the Legendary investment and other potential media deals. Saudi Arabia’s Public Investment Fund (PIF) has expressed interest in investing in Legendary via the fund, according to Bloomberg's sources. The negotiations are said to be in the early stages.

The deal chatter suggests renewed interest from Saudi Arabia's sovereign wealth fund in both Legendary and Hollywood at large. PIF considered making a $700 million investment in Legendary late last year, according to Reuters. And as The Hollywood Reporter reported exclusively earlier this month, Bob Simond's cash-strapped STX Entertainment is close to inking a deal to receive sizable investment from PIF. 

Once welcomed by Hollywood leadership with open arms, PIF became toxic after the killing of Washington Post journalist Jamal Khashoggi was linked to the very top of the Saudi Arabian government. Ari Emanuel's Endeavor Group, for example, decided to extricate itself from a $400 million Saudi investment in the wake of the reports.

When reports emerged last year that PIF was exploring an investment in Legendary, the company took the rare step of saying it had "no interest in conducting a transaction with PIF." Grode later told THR in an interview that Legendary was fully capitalized for film production, and that he would only be interested in finding a deep-pocketed new shareholder to fuel potential acquisitions. 

Legendary's parent, Dalian Wanda Group, may have other motivations though. Once one of China's most aggressive global dealmakers, the conglomerate, led by Chinese billionaire Wang Jianlin, has been shedding international assets ever since it ran afoul of Chinese authorities for its heavy debt load in mid 2017.

The company has sold down its stake in U.S. cinema chain AMC Entertainment and disposed of billions of dollars worth of prime commercial real estate around the globe, including a $1.2 billion development in Beverly Hills. Wanda has periodically explored selling a piece of Legendary for nearly two years, but the high premium it paid for the studio was said to be a stumbling block.