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Legendary Entertainment has found a new home.
Sources with knowledge of the situation say NBCUniversal CEO Steve Burke has been enamored of Legendary — and Universal was the obvious partner for Legendary given its many outlets, including its theme parks and its roster of over two dozen national television channels including NBC, USA and Bravo. Having recently hired former Warner Bros. Television chief Bruce Rosenblum, it is clear that Legendary hopes to expand aggressively in that area. Another attraction, says a source, was the fact that Universal has no other financing partner.
It’s believed that Legendary wanted to sew up the deal before releasing the costly Pacific Rim, which has not been tracking strongly.
Legendary will officially end its current financing, production and distribution pact with Warner Bros. at the end of 2013. Warners’ new CEO Kevin Tsujihara and others had discussed renewing the pact, but on June 24 it was revealed that those negotiations had broken down.
Warner Bros. reportedly felt that Legendary was taking too much credit for the hits, which it merely financed. Sources say Warners also wanted to alter the deal to eliminate the financier’s right to cherry-pick the movies in which it would invest. (Most slate deals require the silent investor to finance a certain number of films and give the studio an opt-out on some of the hottest titles.) Legendary, meanwhile, was insisting that any new deal give it greater involvement in how movies it financed were made and marketed.
When it first signed with Warner Bros. in 2005, Legendary was among the first studio slate deals that provided financing for major releases from private equity raised on Wall Street. At the time, hedge funds were booming and looking for new markets to conquer. Other studios soon followed suit.
Legendary CEO Thomas Tull, with a background in business and finance, was able to initially raise over $600 million from a group of investors. His inaugural deal with Warner Bros. set Legendary up to co-produce and co-finance up to 40 films. Among the first was Batman Begins, which became a global box-office hit.
Like Batman Begins, pictures that followed mostly appealed to young male fanboys, including Superman Returns (2006), 300 (2007), The Dark Knight (2008), The Hangover (2009), Clash of the Titans (2010) and Man of Steel (2013).
Not all of Legendary’s investments paid off. Of the nearly two dozen movies made with Warners to date, disappointments included Jack the Giant Slayer (2013), Lady in the Water (2006), Observe and Report (2009) and Jonah Hex (2010).
In 2010, Tull and two of his investors, Fidelity Investments and Fortress Investment Group, bought out the earlier investors, leaving Tull as the largest single shareholder.
In 2011, with Goldman Sachs as its investment banker, Accel Partners acquired $40 million worth of shares. In December 2012, Waddell & Reed paid $443 million for about 20 percent of Legendary. Legendary also raised $128 million in financing from investors including Google executive Eric Schmidt’s Tomorrow Ventures, Morgan Stanley Investment Management and Peter Thiel’s Thiel Capital.
In addition, the company also took on $150 million in debt and established a $700 million credit facility. Legendary also earlier this year set up a joint venture to produce movies in China.
Tull has been using his increased control and fat bankroll to shift Legendary away from just financing movies. It has expanded into digital and is building a major TV division headed by recent hire Rosenblum.
On the film side, the goal is now to develop and produce what it calls “Legendary” pictures. As part of that, Legendary is also increasing the percentage it puts into a movie. For example, the upcoming Pacific Rim, with a negative cost estimated at $200 million, is 75 percent financed by Legendary.
Among the projects in the pipeline are an adaptation of Warren Ellis’ comic book series Gravel; a film set in the interactive game universe Warcraft; Hot Wheels, based on the iconic toy-car line; and Mass Effect, based on Electronic Arts and BioWare’s video game franchise.
Warcraft and Hot Wheels each reportedly carry production budgets in excess of $100 million.
In a 2008 interview with an alumni review at Hamilton College in upstate New York, where he graduated in 1992, Tull said: “I have loved the movies since I was a little kid. You sit in a theater, and you never know where you will end up. I was and am a real film geek. I never had aspirations to be an actor or director, but I feel fortunate to have been successful in other businesses because it has given me the opportunity to make movies.”
On what he contributes, Tull added: “My talent is to recognize needs and opportunities and to figure out how to fill them.”
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