Eros STX confirmed the discussions today in a press release, declining to identify the potential buyer. Its stock, which began trading on the New York Stock Exchange last year, has dropped 37% today on heavy trading volume, closing at a shade less than 53 cents. Since the summer, it has slipped below $1, triggering a review by the Securities and Exchange Commission that could ultimate lead to a de-listing. The SEC also issued a warning to investors after the company was late in submitting its annual report.
Lazard has been brought in as a financial advisor to steer the sale process. STX has also negotiated an extension of its credit agreement to give itself more time to satisfy repayments of $127 million in debt. If a sale agreement for STX Entertainment is finalized before December 3, according to the company, deadlines for the debt could be extended to February 2022.
Since being formed nearly a decade ago, STX has developed only a handful of major breakout hits, though its management team has pointed to a number of singles and doubles along the way. Among its notable film releases have been the Bad Moms films and Hustlers. It also has TV and digital operations, but its main DNA is in the film business.
The onset of streaming over the past few years has enabled the company to profit from the seemingly insatiable hunger for content. That market force is surely driving the sale discussions despite the signs of distress at the parent company. The M&A climate has been favorable for sellers of late, with private equity players in a frenzy and scale for streaming a top priority for the entire marketplace.
While the merger of Eros International and STX in 2020 was billed as a peanut-butter-and-chocolate combination with benefits for both, it has proved unwieldy. Covid hit the company hard, as it did all players with stakes in film production, but additional headaches have resulted from efforts to reconcile the Mumbai-based operations of Eros with Burbank’s STX.
In 2018, STX abandoned a plan to go public in Hong Kong, citing market conditions. Chaired by Robert Simonds, STX attracted investors like China’s Tencent, private equity firm TPG and John Malone’s Liberty Global. It promised a more talent-friendly, cost-effective approach to moviemaking, especially on the marketing, distribution and international sales front.
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