Combined Company will Remain a Publicly Traded Enterprise,
Uniquely Positioned to Benefit from the Accelerating Consumption of
Premium Digital Content in the World’s Most Important Growth
Markets with a Robust Capital Structure and Experienced Management
Team
- Combines leading Indian film studio and OTT platform with one
of Hollywood’s fastest-growing independent media companies; to be
named Eros STX Global Corporation and will trade publicly on
the NYSE
- Creates a pre-eminent global media company with unique
resources and capability to develop, produce and distribute
Bollywood and Hollywood premium content at scale and across
platforms, leveraging unique strategic and distribution
partnerships globally including Apple, Amazon, Microsoft,
NBCUniversal and Google/YouTube
- Revamped capital structure includes $125 million of incremental
equity from new and existing STX Entertainment equity investors,
including TPG, Hony Capital and Liberty Global; superior liquidity
and a robust balance sheet including a $350 million JP Morgan-led
credit facility
- Increased financial scale with over $600 million in pro forma
revenue for calendar 2019 and over $300 million of
highly-predictable aggregated future revenue from STX Entertainment
films already released through 2019
- 188 million+ Eros Now registered users including 26 million+
paid subscribers
- Approximately $50 million of highly-actionable operating
synergies across global operations
- Newly constituted management team led by Kishore Lulla
as Executive Co-Chairman, Robert Simonds as Co-Chairman
& Chief Executive Officer, Andrew Warren as Chief
Financial Officer, Rishika Lulla Singh and Noah
Fogelson as Co-Presidents, and Prem Parameswaran as Head
of Corporate Strategy
Eros International PLC (NYSE:EROS) (“Eros International”), a
global Indian entertainment company and STX Filmworks, Inc. (“STX
Entertainment”), a global, next generation media company, today
announced they had entered into a definitive stock-for-stock merger
agreement to create the first publicly traded, independent content
and distribution company with global reach and unique positions in
the United States, India and China.
STX Entertainment is a fully-integrated global media company
specializing in the production, marketing, and distribution of
talent-driven motion picture, television and multimedia content. It
is the first major entertainment and media company to be launched
at this scale in Hollywood in more than twenty years.
Founded in 2014, STX Entertainment is a leading independent
Hollywood studio focused on producing, marketing, owning and
distributing film and television content for global audiences
across traditional and digital media platforms. To date, the
company has released 34 films grossing over $1.5bn in global box
office receipts, including such leading titles as Hustlers, Bad
Moms and The Upside. STX Entertainment has a deep global
distribution network spanning 150+ countries with world-class
partners. STX Entertainment has a differentiated asset-lite,
capital efficient business model, unique strategic relationships
and well-established access to the Chinese entertainment market.
STX Entertainment generated revenue of over $400 million in
calendar year 2019.
The combined company, to be called Eros STX Global
Corporation, will have a robust pipeline of feature length
films and episodic content with powerful, well-established
positions in the world’s fastest-growth global markets. The
combined company, with $125 million of incremental equity, will
boast a strong and revamped capital structure and superior
liquidity position at close with $264 million of pro forma net
debt, $195 million of pro forma cash balance and $120 million of
available revolver capacity as of December 31, 2019. The combined
company, which following the consummation of the transaction will
be publicly traded on NYSE, will possess a strong management team
led by highly experienced executives from both entities.
“We are thrilled to join with STX Entertainment as this
represents a landmark step in our company’s transformation. We are
already at an inflection point as we move to a more consistent,
stable and high growth revenue profile with our digital
over-the-top (“OTT”) platform. This merger will not only fuel our
growth, but will also diversify our underlying sources of revenue
and subscribers with a truly global play, building a powerhouse
between East and West. We are well positioned to create long-term
value for our shareholders, partners and employees,” said
Kishore Lulla Executive Chairman and Chief Executive Officer
of Eros International. “Collectively, we will have a unique
capability to present our film and episodic libraries and pipeline
of original content to a broad and growing global audience through
multi-year output deals, strategic alliances and our market leading
Eros Now streaming platform.”
Mr. Lulla continued, “This company will be financially
strong and uniquely positioned to compete immediately thanks to its
global footprint, strong revenue and recapitalized balance sheet,
including a large new equity commitment. These significant
investments and no meaningful debt maturities in the near-term
enable the company to pursue strategic investments in key growth
areas, including traditional and digital distribution, film
acquisition, TV production and development of original episodic
content.”
Robert Simonds, Executive Chairman and Chief Executive
Officer of STX Entertainment stated, “The combination of our two
companies creates the first truly independent media company that
deeply integrates the expertise and creative cultures of Hollywood
and Bollywood. Kishore is a legend in the Indian entertainment
industry and a pioneer in OTT content development and distribution
in India. Together we will have the relationships, management
expertise and resources to create new content and grow rapidly in
the largest and most attractive global markets. On day one, we will
have the ability to tap into our significant combined libraries,
and draw upon our deep relationships with A-list actors, directors
and producers across the globe to create even more compelling
content for millions of consumers.”
Transformational Combination Creates Strategic and Financial
Benefits
- Robust pipeline of film and episodic content with
multi-channel distribution: The combined company is projected
to release approximately 40 feature length films, including seven
sequels to prior hits and 100+ originals of episodic content, in
2020. The combined company’s global multi-channel distribution
across pay-TV via Showtime, digital via Netflix, Hulu, Amazon and
Eros Now, the #1 Subscription Video on Demand (“SVOD”) platform for
Indian content based on size of OTT library, reduces reliance on
theatrical monetization. Eros Now’s strategic and distribution
partnerships with Apple, NBCUniversal, Microsoft and YouTube, as
well as STX Entertainment’s global output and distribution
agreements covering 150+ territories, provides unique opportunities
for rapid content proliferation.
- Well-established positions in the fastest growing and
largest global markets: In India, the world’s fastest growing
media market, the combined company will have a leading box office
presence and one of the largest libraries of Indian language films.
In China, the world’s second fastest growing media market, the
combined company will have existing production and distribution
capabilities plus relationships with the most popular “A-list”
talent in this market. In the United States, the combined company
will have the leading box office share among independent Hollywood
studios, with a successful film library and a substantial film and
episodic content pipeline.
- Strong capital structure and fully funded business plan
enables long term stability and drives growth investment:
Recapitalized balance sheet with $125 million of incremental new
equity funding and meaningful extension of average debt maturities.
The combined company will have a fully-funded business plan, a
conservative capital structure, and superior liquidity position
with $264 million of pro forma net debt, $195 million of pro forma
cash balance and $120 million of revolver capacity as of December
31, 2019. In addition, the new company’s risk-mitigated production
/ distribution model requires limited company equity investment to
produce content at scale, features low overhead and utilizes
third-party funding to drive attractive margins and returns on
investment.
- Substantial operating synergy opportunities: The
combined company is expected to generate approximately $50 million
in run-rate operating synergies within 24 months of closing,
stemming from integration and scale benefits, optimization of
global content distribution and enhanced monetization of the Eros
Now platform.
- A newly constituted board of directors and senior leadership
team: The initial Board of Directors of the combined company
will include nine board members comprised of highly regarded media,
private equity and public company executives with four Directors
selected by Eros International (with one independent Director),
four Directors selected by STX Entertainment (with one independent
Director) and one independent Director selected jointly. Drawing
talent from both companies, the combined entity will have a team of
industry-leading creative, operational and financial experts, with
deep knowledge of key global growth markets and U.S. public company
governance experience. In addition to Mr. Lulla and Mr. Simonds,
Andrew Warren, currently STX Entertainment’s Chief Financial
Officer, will serve as CFO; Rishika Lulla Singh, currently Chairman
of Eros Digital, and Noah Fogelson, currently STX Entertainment’s
EVP of Corporate Strategy and General Counsel, will each serve as
Co-Presidents; and Prem Parameswaran, currently Chief Financial
Officer of Eros International, will serve as Head of Corporate
Strategy. To ensure sustained market focus, Adam Fogelson will
continue to serve as Chairman of STX Motion Pictures Group, while
Pradeep Dwivedi will continue to serve as CEO-India.
Transaction
In the transaction, STX Entertainment will merge with a newly
formed subsidiary of Eros International and will survive as a
wholly owned subsidiary of Eros International. The stock-for-stock,
merger-of-equals transaction calls for the combined company to
utilize Eros International’s existing dual-class share structure.
Eros B Ordinary Shares which will continue to be owned by the Eros
International founder group will retain their 10:1 voting rights
while Eros A Ordinary Shares will carry one vote per share.
Pursuant to the merger agreement, STX Entertainment shares will be
converted into contractual contingent value rights that will be
settled for Eros A Ordinary Shares approximately 75 days after the
effective time of the merger. STX Entertainment shares will convert
such that, prior to giving effect to any incremental equity
investment in Eros International or new management equity plan,
existing Eros International shareholders will own approximately 50%
of the combined company and existing STX Entertainment shareholders
will own approximately 50% of the combined company with
approximately 338 million diluted shares outstanding, taking into
account the effect of existing in-the-money stock options and
conversion of outstanding senior convertible notes. In connection
with the merger, $125 million of incremental equity will also be
contributed to the combined company by new equity investors and
existing STX Entertainment equity investors including TPG, Hony
Capital and Liberty Global. Furthermore, the combined company will
adopt a management equity plan with an aggregate equity pool of 40
million Eros A Ordinary Shares, that will be allocated between Eros
International and STX Entertainment management. The $125 million of
incremental equity and the management equity plan will represent
approximately 15% and 9% of the combined company, respectively, on
a fully diluted basis, based on Eros International’s closing stock
price as of April 16th, 2020. Following the merger, the incremental
equity investment and allocation of the management equity plan, and
based on this closing price, Eros International’s Founders Group
will hold approximately 41% of the voting power and 10% of the
economics in the combined company on a fully diluted basis through
a combination of A and B Ordinary Shares. Please refer to the Eros
International Form 6-K for a full summary of the material terms of
the transaction.
The combined company will be domiciled in Isle of Man, and
headquartered in both Mumbai, Maharashtra, India and Burbank,
California, USA.
Approvals and Timing
The transaction was approved by the Boards of Directors of both
companies, and approved by the requisite vote of the shareholders
of both STX Entertainment and Eros International. The transaction
is subject to regulatory approvals and closing conditions and is
expected to close in the second calendar quarter of 2020. Eros
International’s Founder Group has signed a voting and support
agreement for the transaction.
Financial Outlook
Post closing, Eros STX Global Corporation intends on providing
financial outlook for the combined company, including projected
three-year compound annual growth rates for revenue, free cash flow
and EBITDA.
Advisors
Citigroup Global Markets Inc. is serving as financial adviser to
Eros International and Gibson, Dunn & Crutcher LLP is serving
as its legal adviser. PJT Partners is serving as financial adviser
to STX Entertainment, and Kirkland & Ellis LLP is serving as
its legal adviser. JP Morgan is serving as administrative agent
under the senior credit facility.
About Eros International
Eros International Plc (NYSE:EROS) a Global Indian Entertainment
company that acquires, co-produces and distributes Indian films
across all available formats such as cinema, television and digital
new media. Eros International Plc was the first Indian media
company to list on the New York Stock Exchange. Eros International
has experience of over three decades in establishing a global
platform for Indian cinema. The Company has an extensive and
growing movie library comprised of over 3,000 films, which include
Hindi, Tamil, and other regional language films. The Company also
owns the rapidly growing OTT platform Eros Now which has rights to
over 12,000 films across Hindi and regional languages. For
further information about the company and this transaction, please
visit www.erosplc.com.
About STX Entertainment
STX Entertainment is a fully-integrated global media company
specializing in the production, marketing, and distribution of
talent-driven motion picture, television and multimedia content. It
is the first major entertainment and media company to be launched
at this scale in Hollywood in more than twenty years.
Founded in 2014, STX Entertainment is a leading independent
Hollywood studio focused on producing, marketing, owning and
distributing film and television content for global audiences
across traditional and digital media platforms. To date, the
company has released 34 films grossing over $1.5bn in global box
office receipts, including such leading titles as Hustlers, Bad
Moms and The Upside. STX Entertainment has a deep global
distribution network spanning 150+ countries with world-class
partners. STX Entertainment has a differentiated asset-lite,
capital efficient business model, unique strategic relationships
and well-established access to the Chinese entertainment
market.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This communication contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Exchange
Act, and such statements are subject to the safe harbors created
thereby. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as
“approximately,” “anticipate,” “believe,” “estimate,” “continue,”
“could,” “expect,” “future,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “seek,” “should,” “will” and similar
expressions. Those statements include, among other things, the
discussions of Eros International’s business strategy and
expectations concerning its and the combined company’s market
position, future operations, margins, profitability, liquidity and
capital resources, tax assessment orders and future capital
expenditures. All such forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ
materially from those that Eros International is expecting,
including, without limitation: Eros International’s and the
combined company’s ability to successfully and cost-effectively
source film content; Eros International’s and the combined
company’s ability to achieve the desired growth rate of Eros Now,
its digital over-the-top (“OTT”)
entertainment service; Eros International’s and the combined
company’s ability to maintain or raise sufficient capital; delays,
cost overruns, cancellation or abandonment of the completion or
release of Eros International’s or the combined company’s films;
Eros International’s and the combined company’s ability to predict
the popularity of its films, or changing consumer tastes; Eros
International’s and the combined company’s ability to maintain
existing rights, and to acquire new rights, to film content; Eros
International’s and the combined company’s ability to successfully
defend any future class action law suits it is a party to in the
U.S.; anonymous letters to regulators or business associates or
anonymous allegations on social media regarding Eros
International’s or the combined company’s business practices,
accounting practices and/or officers and directors; Eros
International’s and the combined company’s dependence on the Indian
box office success of its Hindi and high budget Tamil and Telugu
films; Eros International’s and the combined company’s ability to
recoup the full amount of box office revenues to which it is
entitled due to underreporting of box office receipts by theater
operators; Eros International’s and the combined company’s
dependence on its relationships with theater operators and other
industry participants to exploit Eros International’s and the
combined company’s film content; Eros International’s and the
combined company’s ability to mitigate risks relating to
distribution and collection in international markets; fluctuation
in the value of the Indian rupee against foreign currencies; Eros
International’s and the combined company’s ability to compete in
the Indian film industry; Eros International’s and the combined
company’s ability to compete with other forms of entertainment;
Eros International’s and the combined company’s ability to combat
piracy and to protect its intellectual property; Eros
International’s and the combined company’s ability to maintain an
effective system of internal control over financial reporting;
contingent liabilities that may materialize, including Eros
International’s or the combined company’s exposure to liabilities
on account of unfavorable judgments/decisions in relation to legal
proceedings involving Eros International, the combined company or
its subsidiaries and certain of its directors and officers; Eros
International’s and the combined company’s ability to successfully
respond to technological changes; regulatory changes in the Indian
film industry and Eros International’s and the combined company’s
ability to respond to them; Eros International’s and the combined
company’s ability to satisfy debt obligations, fund working capital
and pay dividends; the monetary and fiscal policies of India and
other countries around the world, inflation, deflation,
unanticipated turbulence in interest rates, foreign exchange rates,
equity prices or other rates or prices; Eros International’s and
the combined company’s ability to address the risks associated with
acquisition opportunities; risks that the ongoing novel coronavirus
pandemic and spread of COVID-19, and related public health measures
in India and elsewhere, may have material adverse effects on Eros
International’s and the combined company’s business, financial
position, results of operations and/or cash flows; the occurrence
of any event, change or other circumstances that could give rise to
the termination of the merger agreement or the failure to satisfy
the closing conditions; the possibility that the consummation of
the transactions contemplated by the merger agreement is delayed or
does not occur; uncertainty as to whether the parties will be able
to complete the transactions contemplated by the merger agreement
on the terms set forth therein; uncertainty regarding the timing of
the receipt of required regulatory approvals for the merger; the
outcome of any legal proceedings that may be instituted against the
parties or others following announcement of the transactions
contemplated by the merger agreement; challenges, disruptions and
costs of closing, integrating and achieving anticipated synergies,
or that such synergies will take longer to realize than expected;
risks that the merger and other transactions contemplated by the
merger agreement disrupt current plans and operations that may harm
the parties’ businesses; the amount of any costs, fees, expenses,
impairments and charges related to the merger; uncertainty as to
the effects of the announcement or pendency of the merger and
related transactions on the market price of the Eros A Ordinary
Shares and/or Eros International’s financial performance; and
uncertainty as to the long-term value of the combined company’s
ordinary shares.
The forward-looking statements contained in this communication
are based on historical performance and management’s current plans,
estimates and expectations in light of information currently
available and are subject to uncertainty and changes in
circumstances. There can be no assurance that future developments
affecting Eros International and the combined company will be those
that it has anticipated. Actual results may differ materially from
these expectations due to changes in global, regional or local
political, economic, business, competitive, market, regulatory and
other factors, many of which are beyond Eros International’s and
the combined company’s control. Should one or more of these risks
or uncertainties materialize or should any of Eros International’s
assumptions prove to be incorrect, Eros International’s and the
combined company’s actual results may vary in material respects
from what Eros International may have expressed or implied by these
forward-looking statements. Eros International cautions that you
should not place undue reliance on any of its forward-looking
statements. Any forward-looking statement made by Eros
International in this communication speaks only as of the date on
which Eros International makes it. Factors or events that could
cause Eros International’s actual results to differ may emerge from
time to time, and it is not possible for Eros International to
predict all of them. Eros International undertakes no obligation to
publicly update any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may
be required by applicable securities laws.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200417005565/en/
Eros International Mark
Carbeck Chief Corporate and Strategy Officer Eros International Plc
mark.carbeck@erosintl.com +44 207 258 9909
STX Entertainment Sheila
Ennis Senior Vice President Abernathy MacGregor sbe@abmac.com
415-745-3294
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