Synergies for Saban? Entertainment: Buys Into End-To-End Hollywood Play

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LOS ANGELES BUSINESS JOURNAL® Volume 40, Number 41 THE COMMUNITY OF BUSINESS October 8-14, 2018 • $5.00 Synergies for Saban? Entertainment: Buys into end-to-end Hollywood play

By MATTHEW BLAKE Staff Reporter Billionaire Haim Saban might once again be at the forefront of the entertainment industry’s fu- ture, ironically with a bet on a 65- year-old camera company that caught its break with “Ben-Hur.” Saban Capital Acquisition Corp., a special purpose acquisition company, announced last month the $622-million purchase of venerable motion picture equipment-maker Panavision Inc. as well as Sim Video International Inc., a Toronto-based motion picture post-production outfit. Woodland Hills-headquartered Panavision and Sim would form “a premier global provider of end- to-end production and post- In Focus: Panavision camera in use on set of Netflix series “Instinct.” production services in the entertainment industry,” according to the press release announcing the media and entertainment compa- The filings show Sim with deal. nies that could flourish in the pub- $115 million in 2017 revenue and Indeed, Saban – the media mo- lic market. $25 million in operating income. gul who popularized “Power The Panavision and Sim com- And the filings depict a revi- Rangers” – has perhaps melded bined acquisition was made with talized Panavision, recovering two key trends: the rapid rise in that $55 million plus $250 million from years of debt and unrespon- motion picture content production cash in trust from Saban’s invest- siveness to digital equipment de- and a severely fragmented post- ment vehicle Saban Capital Group velopments. production market. Inc., a $235-million debt raise and Private equity group Cerberus “They have identified a void in a $113-million equity stake from Capital Management bought Pa- the marketplace,” said Elsa Ramo, Panavision and Sim. navision in 2010 with the aim to an entertainment attorney at Ra- The deal is expected to close cut costs and, in 2012, Kim mo Law. in the next 90 days, with the new- Snyder was hired away from the But, Ramo added, Saban faces ly formed company using the Pa- former Kodak Entertainment obstacles, including changes in navision name. (now Kodak) imaging division to production equipment and content Representatives from Saban become chief executive, a posi- producers staying in house. and Panavision declined to com- tion Snyder will retain in the re- Saban Capital Acquisition was ment, stating it was too soon in configured company. founded in 2016 and raised $55 the regulatory process to answer Panavision has stayed afloat million from a public offering at questions not addressed in Securi- due to cuts, contracts with higher- $10 per share with a plan to target ties and Exchange Commission end movies and television series – filings. which make use of its comparably pricier equipment − and riding the Deluxe responded to questions wave of increased content. with an emailed statement that The investor presentation read in part, “As a company at the grafts together Wall Street re- core of the industry’s creation and search to assert that, in 2001, distribution of content, Deluxe there were 182 widely distributed has been proactively transform- scripted movies and TV shows, ing, anticipating shifts and inno- with the total climbing to 487 by vating to address them,” includ- 2017. ing, “expanding our visual effects Panavision had $70 million in business globally.” 2017 operating income. But it Setbacks at Technicolor and also has a modest 5 percent total Deluxe would seem to open the revenue growth over the last five door for the Panavision and Sim Haim Saban years, plateauing at $280 million combination, but it could also in 2017 revenue. show a fundamental industry in- “Panavision alone would not stability. Saban cashed out of Power be an exciting growth play,” said “Post-production is a fast- Rangers in May, selling it and Lloyd Greif, CEO of Greif & Co., evolving industry very susceptible other entertainment intellectual an investment banking firm. to changes in technology,” Greif property to Hasbro Inc. for $522 But synergies from Panavision said. “It is not an investment for million. using the sound editors, visual the faint of heart due to the con- Completion of the Power effects supervisors, and other post tinual requirement for capital ex- Rangers sale came as Saban was -production workers at Sim, Greif penditures to remain state of the still searching for companies to said, and Sim using Panavision’s art.” acquire via Saban Capital Acqui- customer base – might drive sig- Entertainment deal-makers sition Corp., the first special pur- nificant growth. agree there are risks for the newly pose acquisition vehicle he has The synergy would advance formed Panavision, even if overall utilized for deal-making purposes. further, Greif said, if Saban ac- content production continues to Special purpose acquisition quired yet more post-production increase. companies raise money by selling companies. “We are living in a time of shares on the public market, in The post-production industry entertainment industry consolida- order to buy at least one company. is a mix of smaller, often Los An- tion,” Ramo said. Consolidation The deals can be advantageous geles-area outfits, including could mean Panavision being the to private investment, said Ramey FotoKem Industries Inc. in Bur- consolidator and creating its own Layne, an attorney at Vinson bank, Santa Monica-based Harbor post-production titan, Ramo said. Elkins, because investors can Pictures and larger, struggling But it could also mean Walt Dis- hedge their bets by using money companies. ney Co., Netflix Inc., and other raised via selling stock. The biggest post-production major content producers, distribu- SPACs, as they are commonly company is publicly traded Tech- tors and exhibitors increasingly called, have increasingly become nicolor Inc., a France-based com- doing everything in-house, the a part of the investment main- pany that posted a $35-million lawyer added. stream. According to SEC data, operating loss in fiscal 2017 and Whatever its outcome, the Pa- public offerings that use special whose stock price dropped from navision deal is the latest turn in purpose acquisition companies $7.48 at the end of 2015 to $1.05 Saban’s already multifaceted ca- leaped from 10 in 2013 to 33 in at close of business Oct. 2. reer. the first eight months of 2018. Perhaps the second biggest is a A 73-year-old Beverly Hills Mitchell Nussbaum, an attor- private outfit, Deluxe Entertain- resident, Saban amassed a fortune ney at Loeb & Loeb, said as the ment Services Inc. in Burbank, through producing Power Rangers number of SPAC deals rose, a which has announced 130 layoffs in the 1990s. He has a net worth higher profile of investor has be- in the last three months, and re- of $4.3 billion, according to Busi- gun to utilize the vehicles for ac- cently consolidated its Los Ange- ness Journal estimates and ranked quisition purposes. les-area offices. No. 15 on the 2018 Wealthiest “Much more sophisticated Technicolor declined comment Angelenos list. people have taken notice of it,” he for this article, and Deluxe did not Saban owns Saban Capital said. answer questions about its office Group, which invests in family consolidation, layoffs or competi- entertainment, plus an array of tion from Panavision. media ventures including Uni- vision Communications Inc.