Byron Allen entertainment studios are hungry for more acquisitions

Byron Allen in his office.

Media entrepreneur Byron Allen has been making ambitious acquisitions for some time and, backed by a recent billion dollar corporate refinance, he’s craving more.

Since last year, Entertainment Studios, a media company based in Allen’s Century City, bought 16 television stations that broadcast in small and medium-sized markets for $ 500 million, and the company acquired another tv channel this month.

The frenzy follows the company’s acquisition of the basic cable television network The Weather Channel for $ 310 million in 2018.

In addition to its acquisition activity, Allen in June entered into a transport agreement for its cable networks with Comcast Corp., resolving a case that had reached the United States Supreme Court. And last summer, Allen personally invested in Sinclair Broadcast Group Inc.’s $ 10.6 billion deal to buy 21 regional sports networks that were previously owned by 21st Century Fox.

Allen – who first rose to prominence as a teenage stand-up comedian and co-host of a hit NBC series in the late 1970s – started what is now known as Entertainment. Studios in 1993.

Today, the company has an estimated annualized revenue of $ 600 million and 1,300 employees. Entertainment Studios is under the umbrella of its Allen Media.

“We see ourselves as a private equity firm acquiring media assets that can work together,” which generates synergy and growth, Allen said in an interview. “And we are on an acquisition track.”

In February, in a move that received little press attention, Entertainment Studios closed a major refinancing.

Institutional investors bought $ 660 million in first lien, a senior B secured term loan and a $ 300 million unsecured note. RBC Capital Markets has provided M&A advice and arranged financings for Allen Media over the past 12 months.

Allen’s company also has a $ 60 million revolving line of credit.

Debt maturities run from 2025 to 2028, giving Allen some leeway. Allen Media’s debt is rated by corporate credit bureaus in a speculative range, although stable and improving.

Allen said EBITDA cash flow is around $ 300 million per year, and he rates the company at billions of single-digit dollars, using standard cash flow multiples for media companies.

Tune in TV channels

Television stations, although having suffered economic erosion in recent years, are drawn into merger and acquisition activity, thanks to the improvement in the financial situation due to the increase in cable transport costs. This makes it a priority for further Entertainment Studios acquisitions.

Allen is primarily interested in affiliates of the Big Four TV networks – his company’s 16 TV channels all fall into this category – but the company is looking for digital media as well.

Existing operations include 24-hour cable / video streaming channels (Comedy.TV, Recipe.TV, Pets.TV, Cars.TV and others) and movies, including theatrical distribution, which is one of the most lucrative parts of the film. Business.

In addition, Entertainment Studios operates television production and syndication businesses (shows include “Comics Unleashed,” long-standing “Entertainers with Byron Allen” and court shows, such as “Justice With Judge Mablean”) and media. digital.

The company’s various activities “benefit from a lean investment business model, producing good liquidity and good cash flow,” Moody’s Investors Service Inc. wrote in February.

While the bulk of the company’s assets are traditional media, digital entertainment platforms are the hotspot of the industry and they often have sky-high valuations.

Entertainment Studios took a digital foothold by creating the Local Now app, which Allen describes as “a combination of local news and Netflix for free,” because of its ad-supported revenue model.

The company’s digital video-centric platform focused on black audiences, TheGrio, has seen its audience grow from less than one million monthly active users at the time of its purchase in 2016 to over 10.5 million. million monthly users today.

Allen published a personal manifesto on TheGrio in June on the National Race Dialogue titled “Black America Speaks.” America Should Listen, ”which called for specific action on six fronts.

Speak

Speaking at the Black Business Matters webinar on July 30 hosted by the Los Angeles Business Journal in partnership with the African American Chamber of Commerce of Greater Los Angeles, Allen expressed his frustration with traditional financial institutions and their black loan practices.

While lenders brag about generously funding “minorities,” Allen countered that they cater primarily to the female population. “If you look further, they don’t lend money to African Americans, which is why our ownership is low and our businesses are not properly capitalized with capital that is not predatory,” he said. declared.

Allen feels personally nutty about access to finance. In its early days, he said, his company was forced to sell debt contracts to high factor financiers despite advertising contracts with blue chip advertisers. “I’m not looking for a document,” Allen said. “I have never looked for alms in my 59 years on this planet. I’m only looking for a fair opportunity, but the opportunities haven’t been right.

Looking at Allen’s business today, an important trait is the frugality of the business. “Efficiency will always be in our DNA,” he said, and Allen has traced that focus back to the company’s start-up roots.

Allen grew the business with persistence, an energetic sales sense and an ability to charm. (Don’t hesitate to press your “demand” firmly in the negotiations, he advised, otherwise “you will die poor”.)

Moody’s estimates that about half of Allen’s commercial income comes from advertising, where he has long courted Madison Avenue for ads placed on his TV shows.

Some 45 years after Allen first spoke into an open microphone, he still does stand-up comedy, and he’s a regular on his company’s syndicated television series “Funny You Should Ask,” delivering series of jokes.

Allen is also the sole owner of Entertainment Studios, making the company minority-owned.

Supreme Court case

Entertainment Studios has filed a multi-year racial discrimination lawsuit against cable TV giants Comcast and Charter Communications Inc. over content distribution. Although the U.S. Supreme Court sided with Comcast in March on a procedural issue, Comcast resolved the dispute in June by entering into a distribution deal for the cable TV network with Entertainment Studios.

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S&P Global Inc. hailed the agreement to supply the Entertainment Studios networks distribution and the extension of the Weather Channel company’s flagship distribution agreement with a “modest increase in affiliate fees.”

This is a feat in a tough environment for price hikes as the number of traditional basic cable subscribers declines.

Meanwhile, the dispute involving Charter – the country’s second-largest traditional cable system operator – remains unresolved.

A hit on Entertainment Studios revolves around governance risks, as the ownership of the company is concentrated in one person.

Allen dismisses such concerns, saying the leadership team is deep and can achieve the company’s lofty growth ambitions. Its management ranks are stable, with some employees recording a decade or more of service.

Besides his passion for entertainment studios, Allen is a major donor to the Democratic Party, but pragmatically separates politics and business.

Sinclair Broadcast Group – with which he has had a 27-year business relationship and with which his family office recently teamed up for an investment in regional sports television – is rather conservative.

Additionally, the cinema arm of its entertainment studios distributed “Chappaquiddick,” which cast an unfavorable light on Democratic icon Ted Kennedy.

“Someone’s political preference is something I would never blame them for,” Allen says. “I deal with everyone. This is why America is a great country.

A timeline of success

How Byron Allen built his entertainment empire:

1970s: As a teenager, Allen hangs out in the studios and offices of NBC Television in Burbank, where his mother, Carolyn Folks, works as a publicist on the network.

1979: After working in clubs and as a joke writer, Allen gained national fame as the youngest guest comedian on NBC’s “The Tonight Show Starring Johnny Carson”.

1979-1984: Co-stars on NBC’s hit reality TV series “Real People”.

1993: Founds what will become Entertainment Studios, the company that will become its flagship operating company, at his dining table.

2009: Simultaneously launches six cable networks, including Cars.TV, Comedy.TV and Recipe.TV.

2012: Launch of the seventh JusticeCentral.TV cable network.

2015 : Acquires national movie distributor Freestyle, now known as Entertainment Studios Motion Pictures, and related company Freestyle Digital Media.

2016: Buy TheGrio, a video-centric digital news community platform focused on black audiences.

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2017: Kicks off an annual Oscar night fundraiser for the Los Angeles Children’s Hospital featuring Hollywood talent.

2018: Entertainment Studios Announces $ 500 Million Credit Facility; buys The Weather Channel’s linear television assets for $ 310 million.

2019: acquires four network-affiliated broadcast television stations for $ 165 million; invests with Sinclair Broadcast Group to acquire 21 regional sports television networks.

2020: Raises $ 1 billion in debt financing, buys 11 network affiliate TV stations for $ 305 million. Resolves racial bias dispute with cable TV giant Comcast, which signs a full content distribution agreement.

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