Burbank-based Legendary Entertainment received a $760 million minority-stake investment that will enable the developer and producer of big-budget content to join the mergers-and-acquisition rip going across Hollywood.
The buyer is New York-based private equity and alternative asset manager giant Apollo Funds, taking a “minority preferred equity investment.” Apollo Partners Aaron Sobel and Lee Solomon join the board of directors at privately held Legendary. Sobel and Solomon jointly stated in the announcement for the transaction that “massive secular tailwinds [are] driving the industry. Already, Legendary generates significant free cash flow that’s reinvested in high-growth categories, and we also see compelling M&A opportunities ahead.”
Mergers and acquisitions would be a new thrust for Legendary.
Legendary Chief Executive Joshua Grode said that Apollo becomes “new shareholder in Legendary and equally important as a thought partner in our business” in a statement about the investment.
Grode joined the company in Dec. 2017 from a private law practice in Century City where Legendary was a client.
Legendary management retains control of the company in the deal.
Legendary-associated movies have grossed a total of $18 billion worldwide at the box office. The company produced big-budget films “Godzilla vs. Kong” and “Dune,” distributed by Warner Bros. Pictures last year, and is involved in TV programing, virtual reality and comic books.
Legendary was acquired by Beijing-based Dalian Wanda in 2016 for $3.5 billion. That deal was considered emblematic of over-exuberance for Hollywood assets by Chinese buyers, which since has cooled. Dalian Wanda had also owned top U.S. movie theater chain AMC Entertainment, but cashed out of the publicly traded exhibitor last year.
Legendary’s current valuation in the Apollo transaction isn’t indicated because Apollo’s percentage stake is not known. Apollo’s $760 million inflow is divided between Wanda, which reduces its majority ownership stake, and also Legendary’s corporate coffers, which can help fund acquisitions.
Apollo enlarges its media and entertainment footprint by connecting to Legendary. Other Apollo investments in the sector include broadcast TV stations and major TV program format outfit Endemol Shine, which it sold with co-owner Walt Disney Co. in 2020.
Hollywood is engulfed in a mergers-and-acquisitions frenzy triggered by the structural shift to direct-to-home video streaming pioneered by Los Gatos-based Netflix, and private equity giants are rushing in. For example, another private equity firm, Blackstone, which has an office in Santa Monica, backs startup Candle Media run by former Disney senior executives Kevin Mayer and Tom Staggs; Candle made a splash recently buying stakes in Hollywood-talent-led ventures Hello Sunshine from Reese Witherspoon and Will Smith and Jada Pinkett-Smith’s Westbrook Media.
With deep pocket investor Apollo now on board, Legendary can move from being a creator of high-end entertainment focused on refinancing to being a broader-based entertainment and media company expanding through acquisitions.
Previously, Legendary is known to have been pondering capital infusion transactions such as going public via reverse merger with a special purpose acquisition company. In 2019, reports surfaced that private equity outfit Colony Capital Inc. was pondering an investment, but none materialized.