Lionsgate is looking to absorb part of, or all of STX Entertainment, Deadline has learned from sources.
STX was recently rescued back in early December from a draconian merger with Eros by Jahm Najafi’s Phoenix-based The Najafi Companies for $173M.
As Deadline first reported, that move by Najafi was an interim step on the way to a later, possibly bigger, transaction. It sounds like, Lionsgate is it. A key element of the agreement then was a “go-shop period,” a 45-day span during which the board of directors of ErosSTX, with the assistance of its financial advisor, Lazard, could solicit alternative proposals from third parties. Reportedly there are other suitors in the mix for the STX assets which include Jennifer Lopez’s highest grossing live-action domestic movie, Hustlers ($105M) and the Bad Moms comedy franchise.
Najafi deal back in December included the refinancing of STX’s debt and provided a significant investment in growth. Najafi’s rescue came at a time when STX was facing a deadline to repay $127M in debt.
Separately, a Lionsgate and STX spokesperson declined to comment.
Variety first had the news about Lionsgate’s serious kicking of the tires of STX.
STX launched with the 2015 Joel Edgerton directed horror movie The Gift in 2015. Initially, the studio’s plan was to make movies for the underserved adult audience which could cross over, and at lesser cost than major studios. That planned worked for a bit with Hustlers and Bad Moms ($314.4M from two films worldwide) before STX faced the headwinds of the pandemic. They pivoted sending their theatrical titles sooner to PVOD and selling off streaming rights, i.e. Gerard Butler’s Greenland going to HBO Max for $20M-$30M and Kristen Bell comedy Queenpins to Paramount+ for twice the film’s $10 million cost.
The company had withdrawn a planned IPO in Hong Kong in 2018, citing market conditions, a move that deprived it of much-needed resources. Despite the success of Hustlers, a quest for a new financial structure led the studio into the arms of Eros in 2020, a company which ultimately wound up being in financial peril. In the months before Najafi’s acquisition of STX, ErosSTX shares had slipped below $1 for an extended period, triggering a warning from the SEC and a potential de-listing.
Dade Hayes contributed to this report.
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