Under the deal, Legendary management will regain operational, strategic and creative control of the company. Chinese giant Dailan Wanda will reduce its ownership position while remaining majority shareholder.
In an interview with Deadline, Legendary CEO Josh Grode declined to provide a valuation for Legendary, saying the transaction did not center on it. The exact percentage owned by Apollo was also not quantified, but was described in the official announcement as “significant.” Wanda bought Legendary for $3.5 billion in 2016.
Grode has described fielding multiple inbound offers in recent months and said several scenarios were considered, including a full takeover or participation in a deal with a special-purpose acquisition company, or SPAC. The media and entertainment sector has benefited seen a surge of investment of late, much of it private equity, aimed at capitalizing on the streaming boom and the hunger for content. Against a backdrop of corporate M&A, and mergers pending between Discovery and WarnerMedia, and Amazon and MGM, Reese Witherspoon’s Hello Sunshine and CoComelon producer Moonbug Entertainment have landed deals. Dozens of other entities are said to be in play.
The minority investment comes after Legendary had its most profitable year to date in 2021, the company said in announcing the transaction. It is ramping up production on a number of new film and TV projects, in the U.S. and globally.
Legendary was founded in 2004 by billionaire Thomas Tull, who left the company in 2017 after selling control of the firm to Wanda.
Films associated with Legendary have brought in $18 billion in global box office. Key recent titles include Godzilla vs. Kong, Dune and Enola Holmes and the upcoming Texas Chainsaw Massacre and Fresh. On the TV side, Legendary titles have included Lost in Space and Carnival Row, with upcoming series including Paper Girls and Lightyears. Legendary has comic book, VR, licensing and merchandising divisions.
Apollo has long been active in the media business, buying large interests in assets like local TV station groups and production giant Endemol Shine, which it teamed with Disney to sell to Banijay in 2020.
Legendary had been on the comeback trail when Covid began its disruptive sweep across the world in 2020. With multiple blockbusters on Warner Bros’ slate, the company found itself at the center of a heated debate in Hollywood. WarnerMedia elected to put every Warner film in 2021, including GvK and Dune, on streaming service HBO Max at the same time they hit theaters. That move, known inside WarnerMedia as “Project Popcorn,” elicited a fierce backlash, with major filmmakers and agents publicly denouncing WarnerMedia and its CEO, Jason Kilar. As the months passed and the company reached financial settlements with dozens of participants, at a reported cost in the range of $200 million, the clamor died down significantly.
Grode said the uncertainties facing the movie business did not drive the transaction. “We didn’t need to do this now,” he said. “We have a significant amount of cash on our balance sheet.” The influx of funding from Apollo “positions us for what we believe is the future, which is a lot of M&A opportunities.”
Nevertheless, Grode conceded, “models have changed” in the movie business, and it’s still too early to know the full impact of release window changes on businesses like Legendary’s. “Until we really know that, everybody is taking a fairly cautious approach,” he said.
“Legendary is known for its world-class content and franchise features and has strong relationships with top studios and streaming platforms alike,” Apollo Private Equity Partners Aaron Sobel and Lee Solomon said in a press release. “In making this fund investment, we were excited by the velocity in their television and film business, the strong management team and the massive secular tailwinds driving the industry.”
They added, “Already, Legendary generates significant free cash flow that’s reinvested in high-growth categories, and we also see compelling M&A opportunities ahead. We view Legendary as a platform for potential follow-on investments and are excited to support Josh, Mary, Chris, Ron and the rest of the Legendary team.”
In the official announcement, Grode said the transaction “validates our success to-date and invigorates our growth plans with a strategic capital partner who shares our goal to grow the business. The creative leadership of Mary Parent combined with our commitment to make culturally relevant, entertaining content allows us to continue to build on this success now with the support of Apollo as well as our partners at Wanda.”
Lincoln Zhang, the lead director on the board of Legendary as a representative of Wanda, said the company acquired Legendary in 2016 “with a thesis to grow the full scope of content production and distribution globally.” The company has “seen seen strong success to-date. We are pleased to now welcome Apollo as investors in the company.”
LionTree served as financial advisor and Wachtell, Lipton, Rosen & Katz as legal counsel to the Apollo Funds in the transaction. Moelis & Company served as lead financial advisor to Legendary and Paul Weiss and Stroock served as legal counsel. Han Kun Law Firm and KL Gates served as legal counsel for Wanda. Centerview Partners advised on pre-transaction matters.