Indie Giants Circle Endemol Shine as Bidding Heats Up

Courtesy of Netflix
'Black Mirror'

Lionsgate, ITV, FremantleMedia, Banijay Group and All3Media are among the mini-majors eyeing the 'Big Brother' and 'Black Mirror' producer, which could go for up to $4 billion in a seller's market.

Disney’s planned takeover of 21st Century Fox has dominated the headlines lately, but the focus will shift next week to the sale of another media giant as TV behemoth Endemol Shine Group, producers of everything from Big Brother and MasterChef to Black Mirror and Peaky Blinders, goes on the block.

Big-name suitors have already lined up, with the likes Lionsgate, ITV, RTL Group’s FremantleMedia, France’s Banijay Group and Liberty Global/Discovery Communications’ All3Media among the expected bidders.

Endemol Shine was formed four years ago when Fox struck a deal with private equity firm Apollo Global Management to merge Dutch group Endemol (Big Brother) and Shine, the Elisabeth Murdoch-founded Brit producer behind The Biggest Loser with American Idol parent Core Media. Their 50-50 joint venture became reality in 2015.

“The opportunity to create something that was really the global leader in terms of scale was something that shouldn’t be passed up,” James Murdoch, currently CEO of Fox, said before the deal closed.

Endemol Shine might be a minnow compared to Fox, but the company is a giant on the indie scene and — with entertainment companies of all stripes looking to gain scale on the global market — an attractive prize. The group turned out more than 800 productions last year in 79 territories. From its headquarters in Amsterdam, Endemol Shine overseas a raft of production companies around the world, including the likes of Kudos (Humans) and Tiger Aspect (Peaky Blinders). A buyout deal is being valued at between $2.5 billion to $4 billion, including debt. Assuming another production giant wins out, the Endemol Shine sale will also represent a further consolidation on the global market.

Disney seems not to be particularly concerned with retaining Fox’s stake in Endemol Shine. Disney’s original $52.4 billion bid, since sweetened to $71.3 billion, for large parts of 21 Century Fox, originally listed Endemol Shine as one of the Fox’s assets that, as Disney put in in a December conference call, would "enhance our content output and intellectual property portfolio."

But on a June 20 call following the raised bid, Disney chairman and CEO Bob Iger didn’t even mention Endemol Shine when he ran through “the incredibly valuable assets” the company is looking to acquire from Fox in the deal.

Disney might prefer to let Fox and Apollo sell Endemol Shine, Enders Analysis founder Claire Enders tells The Hollywood Reporter, to improve the chances of the Fox acquisition passing muster with European competition authorities. One banker also highlighted that Disney could share in the cash from any Endemol Shine sale, helping the Mouse House recoup some money to offset its larger-than-expected bid for Fox. In recent years, entertainment companies have often looked to buy full control or sell their stakes in 50-50 ventures to clarify ownership and consolidate their financials, something the banker noted favored an Endemol Shine sell-off.

But for other independent production companies, Endemol Shine represents a means of boosting production capacity and expertise in a boom market for television content. Endemol Shine is one of only a handful of indie firms with a global reach and a broad range of TV content. Key is the group’s local expertise in producing homegrown content, either via adaptation (Endemol Shine has local versions of Big Brother airing in some 20 countries worldwide) or by developing high-end scripted originals, such as British hits Black Mirror, Peaky Blinders and Broadchurch. With streaming giants Netflix and Amazon Prime devoting more resources to producing local-language shows, Endemol Shine is perfectly positioned to capitalize on the market shift.

Scale is another big selling point for potential buyers. The production giant has operations in 23 countries and estimated annual earnings before interest, taxes, depreciation and amortization of around $288 million. While the group hasn’t had a buzzy new show recently, it has a solid catalog of flagship titles and a track record of developing new, world-conquering formats.

In April, Amazon ordered a U.S. adaptation of Endemol Shine’s Utopia, a cult dystopian drama that aired for two seasons on Channel 4, with Gillian Flynn (Gone Girl) writing the series about a group of young adults who find a cult underground graphic novel and end up being hunted by a shadowy organization. Idris Elba has signed on with Netflix to executive produce and star in Endemol Shine’s upcoming comedy Turn Up Charlie, playing a struggling DJ and bachelor who gets another chance at success when he becomes the manny for his famous best friend’s daughter.

Potential buyers, according to multiple sources, are expected to submit bids, or at least formalize their interest in Endemol Shine, during the week of July 9.

Representatives for Fox, Endemol Shine and various potential bidders declined to comment. But Liberty Global CEO Mike Fries said at a recent industry event that "it would be surprising if we didn’t look at [the company] through All3Media," given that the international cable giant has continued to "get its feet wet" through content deals.

The management of U.K. TV giant ITV has also been acquiring various production outfits in recent years to diversify its revenue beyond TV networks and advertising in what has often been called a new golden age of TV.

ITV Studios "is going very well," new CEO Carolyn McCall said earlier this year. “It has done exactly what it set out to do. … Studios was about diversifying ITV away from ad revenue, and it is definitely doing that, and we will need to continue to do that.” The exec highlighted that the strategy has involved "acquiring the right genre in the right geography at the right time."

Ever since it completed its $4.4 billion acquisition of Starz, Lionsgate has been eyeing additional acquisitions to access yet more premium content. Case in point: a recent deal for a majority stake in 3 Arts Entertainment, the Los Angeles-based management and production firm. That deal enables Lionsgate to more aggressively pursue creative talent to exploit ownership rights, especially after acquiring Starz to get deeper into television.

Nabbing Endemol Shine would enable Lionsgate to fold the company's content library into its own and larger content vault for exploitation worldwide. And the mega-deal for Starz underlines how Lionsgate is not shy about paying big bucks for a TV asset.

Lionsgate possibly joining the auction for Endemol also comes nearly two years after the studio hired ex-Endemol exec Gisela Asimus-Minnbergh to launch its unscripted programming and format sales division worldwide.

So there should be a pool of interested parties for the production giant. But how many companies actually submit bids, and at what price, remains to be seen. Fox is understood to be ready to retain a minority stake in Endemol Shine depending on how the bidding process goes.