Spin Master Acquires Flying Toy Maker Aerobie
Spin Master Corp. announced the acquisition of certain assets of Aerobie, Inc. The transaction closed on July 28, 2017. As Spin Master continues to diversify its product offering, the acquisition displays the company’s further focus on the outdoor business segment.
Alan Adler, an engineer and part-time Stanford University teacher who spent his spare time inventing toys, founded Aerobie in Palo Alto, Calif. With an interest in aerodynamics, Adler had set out to create better flying toys, resulting in the flying ring format. In 1984, the inventor launched his own company to ensure production quality and the flying ring soon earned the company a Guinness World Record for the farthest thrown object. Aerobie has distribution in more than 60 countries.
Since Spin Master’s IPO in 2015, Spin Master has acquired seven companies including Aerobie and the recently announced Marbles acquisition, in an ongoing effort to continue to grow the company through strategic acquisitions.
Aerobie will be managed by Swimways, a 2016 acquisition, and will join the Coop family of branded active, outdoor lifestyle products.
Toy State Taps ChizComm as AOR
Toy State has named ChizComm as its agency of record. The appointment is timed to Toy State’s expansion into a wider range of categories with a broadening portfolio of licenses. ChizComm’s partnership with Toy State will add to the firm’s roster of lifestyle, toys and children’s entertainment clients.
“We’ve been strategically growing the company for over 30 years to achieve and maintain our leadership position in the
toy vehicle category,” says Toy State President Andy Friess. “Toy State’s sights are now firmly set on becoming a dominant player in other toy categories. We’ve already taken many important steps toward realizing that goal, including partnering with ChizComm.”
Spin Master Named Monster Jam’s Master Toy Partner
Spin Master announced a licensing partnership with Feld Entertainment Inc. as the new worldwide master toy partner for Monster Jam. The 10-year licensing partnership begins in 2019.
Monster Jam produces more than 400 events each year across five continents to millions of families in attendance. Its broadcasts of live events reach millions on the FOX Sports family of networks in addition to their digital reach. The Monster Jam franchise includes a wide range of toys and products featuring Grave Digger, Max-D, Megalodon, Monster Mutt, and El Toro Loco.
“This decade-long brand partnership with Spin Master will grow the Monster Jam toy line exponentially, engaging new and current fans, while reinforcing the Monster Jam franchise as one of the most exciting and fastest growing in all of motorsports,” says Kenneth Feld, CEO, Feld Entertainment. “Together our companies are perfectly aligned to uplift and inspire children through the everyday play of Monster Jam.”
Pokémon Two-Day Movie Event Planned for November
The new animated film Pokémon the Movie: I Choose You!, based on the Pokémon brand, is coming to movie theaters around the world for two days this November. The Pokémon Company International has entered into an agreement with Fathom Events, a leader in event cinema distribution, for international theatrical rights to the movie outside of Asia.
Pokémon the Movie: I Choose You! is an origin story highlighting Ash and Pikachu’s first meeting and their adventures as they search for the Legendary Pokémon Ho-Oh. The iconic pair encounters familiar faces along the way, new characters including Trainers Verity and Sorrel, and even a mysterious new Mythical Pokémon, Marshadow.
Pokémon the Movie: I Choose You! will be shown in movie theaters for two days only, on Sunday, November 5, and Monday, November 6, 2017, in select international markets. More information, including participating theater locations, ticketing dates, and event details, will be available soon on www.FathomEvents.com. Parents and fans can visit the site now to sign up and receive updates and details about the upcoming limited theatrical release.
Discovery to Acquire Scripps
Discovery Communications and Scripps Networks Interactive have signed a definitive agreement for Discovery to acquire Scripps in a cash-and-stock transaction valued at $14.6 billion, or $90 per share, based on Discovery’s July 21 closing price. The purchase price represents a premium of 34 percent to Scripps’ unaffected share price as of July 18, 2017. The transaction is expected to close by early 2018.
New Innovator Across a Broad Portfolio of Entertainment Assets
Together, Discovery and Scripps will offer a complementary suite of brands. The combined company will produce approximately 8,000 hours of original programming annually, be home to approximately 300,000 hours of library content, and will generate a combined 7 billion short-form video streams monthly, demonstrating its commitment to delivering content as a top short-form provider.
Combined, Discovery and Scripps will have nearly 20 percent share of ad-supported pay-TV audiences in the U.S. Additionally, the combined company will be home to five of the top pay-TV networks for women and will account for more than 20 percent share of women watching primetime pay-TV in the U.S.
The Combined Portfolio’s Brands Will Include:
Discovery: Discovery Channel, TLC, Investigation Discovery, Animal Planet, Science and Turbo/Velocity, as well as OWN in the U.S., Discovery Kids in Latin America, and Eurosport, a provider of locally relevant, premium sports and home of the Olympic Games across Europe.
Scripps: HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country, as well as TVN, a premiere multi-platform provider of entertainment, lifestyle and news content in Poland; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan- regional TV food network in Asia; and lifestyle channel Fine Living Network.
International Growth Opportunities
The combination will extend Scripps’ brands, programming and talent to a broader international audience through Discovery’s global distribution, sales and languaging infrastructure. Discovery sees strong opportunities to strengthen its existing global female networks with select content from Food Network, HGTV, and all the Scripps brands. Scripps also has a strong position in key international growth markets, including the UK and Poland, and will help fuel Discovery’s existing content pipeline in growth areas such as Discovery’s Home and Health network in Latin America.
Social, Mobile and Non-linear Growth Opportunities
The combined company will deliver 7 billion monthly short-form streams, bringing together Scripps’ established expertise in short-form video creation with Discovery’s investment in Group Nine Media to create a new scale player with a strong ability to compete for audiences and ad dollars. The combination will give Discovery a presence on new video and social media platforms. Additionally, Scripps Lifestyle Studios will become a key component of Discovery’s content engine, making the company a leader in key strategic areas such as data-driven ad sales, endemic advertising, and branded entertainment solutions.
Discovery’s added scale, content engine and multiple brand offerings will present a compelling opportunity for new digital distribution partners, including mobile, OTT, and direct-to-consumer platforms and offerings.
Synergies
The combination is expected to create significant cost synergies, estimated at approximately $350 million. The deal is expected to be accretive to Adjusted Earnings per Share and to Free Cash Flow in the first year after close.
Transaction Details
Scripps shareholders will receive $90 per share under the terms of the agreement, comprised of $63.00 per share in cash and $27.00 per share in Class C Common shares of Discovery stock, based on Discovery’s Friday, July 21 closing price. The stock portion will be subject to a collar based on the volume weighted average price of Discovery Class C Common Shares over the 15 trading days ending on the third trading day prior to closing (the “Average Discovery Price”). Scripps shareholders will receive 1.2096 Discovery Class C Common shares if the Average Discovery Price is below $22.32, and 0.9408 Discovery Class C Common shares if the Average Discovery Price is above $28.70. If the Average Discovery Price is greater than or equal to $22.32 but less than or equal to $28.70, Scripps shareholders will receive a number of shares between 1.2096 and 0.9408 equal to $27.00 in value. If the Average Discovery Price is between $22.32 and $25.51, Discovery has the option to pay additional cash instead of issuing more shares.
Scripps shareholders will have the option to elect to receive their consideration in cash, stock or the mixture described above, subject to pro rata cut backs to the extent cash or stock is oversubscribed.
This purchase price implies a total transaction value of $14.6 billion, including the assumption of Scripps’ net debt of approximately $2.7 billion. Post-closing, Scripps’ shareholders will own approximately 20% of Discovery’s fully diluted common shares and Discovery’s shareholders will own approximately 80 percent.
The cash portion of the purchase price will be financed with a combination of new debt and cash on hand. Discovery has secured fully committed financing from affiliates of Goldman Sachs & Co. LLC to fund the acquisition. Discovery expects to maintain investment grade ratings throughout this transaction. As part of its commitment to de-lever its balance sheet, Discovery intends to suspend its share repurchase program until such time as its credit metrics are in line with its rating. Specifically, Discovery expects to be below 3.5x gross debt to AOIBDA within the first two years after the transaction closes, using substantially all free cash flow to reduce pre-payable and/or short-term debt.
Mr. Lowe is expected to join Discovery’s board of directors following the close of the transaction.
The transaction is subject to approval by Discovery and Scripps’ shareholders, regulatory approvals, and other customary closing conditions.
John C. Malone, Advance/Newhouse Programming Partnership (“ANPP”) and members of the Scripps family have entered into voting agreements to vote in favor of the transaction and take certain other actions, in each case subject to the terms and conditions of their respective agreements.
In addition, ANPP has provided its consent, in its capacity as the holder of Discovery’s outstanding shares of Series A preferred stock, for Discovery to enter into the merger agreement and consummate the merger. In connection with this consent, Discovery and ANPP have entered into an exchange agreement pursuant to which ANPP will exchange all of its shares of Series A and Series C preferred stock of Discovery for shares of newly designated Series A-1 and Series C-1 preferred stock of Discovery. The exchange transaction will not change the aggregate number of shares of Discovery’s Series A common stock and Series C common stock that are beneficially owned by ANPP. The terms of the exchange agreement were negotiated, considered and approved by an independent committee of disinterested directors of Discovery, which committee was advised by independent financial advisors and legal counsel.
Guggenheim Securities, LLC and Goldman Sachs & Co. LLC served as financial advisors and Debevoise & Plimpton LLP served as legal advisor to Discovery. Allen & Company LLC and J.P. Morgan Securities LLC served as financial advisors and Weil Gotshal & Manges LLP served as legal advisor to Scripps. Evercore Group L.L.C. served as financial advisor and Kirkland & Ellis served as legal advisor to the Scripps family. UBS Investment Bank served as financial advisor and Sullivan & Cromwell LLP served as legal advisor to Advance/Newhouse.