Imagine Entertainment’s $700 Million Deal With Centricus Hits a Wall (Exclusive)

Amid a severe downturn on Wall Street and downward pressure on valuations, a $700 million deal for Ron Howard and Brian Grazer’s Imagine Entertainment to sell to a British investment firm has slowed to a halt, TheWrap has learned.

London-based investment firm Centricus Asset Management Ltd. was in negotiations to acquire a majority ownership stake in a deal that would value the production banner at anywhere between $600 million and $800 million, The Wall Street Journal reported in January. But despite a flurry of merger and acquisition activity throughout the media sector in recent years, talks between the two companies have cooled, according to an individual with knowledge of the firm.

The individual said that there has been no material movement on the deal for weeks, and that no single issue was holding things up. Rather, it seems that the deal is a casualty of dampened enthusiasm in investment for content companies as the streaming business model has been called into question, and the hit that media and tech companies have taken on Wall Street.

So while the deal isn’t dead, its status remains up in the air, leaving executives at Imagine Entertainment frustrated and tired of waiting, according to the knowledgeable individual.

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Grazer, 70, and Howard, 68, are among Hollywood’s most successful producers of prestige projects from Oscar-winning “A Beautiful Mind” to the comedy classic “Arrested Development.” While neither needs to sell their company, they would welcome the opportunity to finally cash out after decades of work. Especially at a time when producer fees are largely capped by streaming companies, and profit participation deals are hard to find.

As of January, investment firm Raine Group — which owns 51% of Imagine after a $100 million investment in 2016 — was expected to retain a minority ownership should the Centricus deal close. Howard and Grazer were also expected to retain their leadership roles in the company. There’s no indication that Imagine Entertainment is in financial need of being acquired, but its investors may want to capitalize on the recent high valuation of the company.

Reps for Raine Group, Imagine Entertainment and Centricus did not respond to TheWrap’s requests for comment.

Imagine Entertainment — which consists of Imagine Features, Imagine Television Studios, Imagine Documentaries, Imagine Kids+Family, Imagine Brands and stakes in Jax Media and Jigsaw Productions — was previously pursued last year by Blackstone-backed Candle Media, which is headed up by former Disney executives Kevin Mayer and Tom Staggs.

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While Imagine moved on to talks with Centricus instead, Candle Media continued on a buying spree that includes the acquisition of “CoComelon” production company Moonbug (for a reported $3 billion) and Reese Witherspoon’s Hello Sunshine ($900 million).

However, Wall Street’s recent turnaround on the economics of streaming may have forced a widespread reevaluation that has the industry in a holding pattern of sorts. “It seems like activity has been high in M&A, but is taking a pause as the future of streaming is clarified post the Netflix implosion,” Steven Birenberg, founder of Northlake Capital Management, said.

Prior to Netflix’s stock tumble, recent investments into high-profile production houses such as LeBron James’ SpringHill Entertainment and the Russo Brothers’ AGBO highlighted the industry’s yearning for access to key talent and content. Yet many of these deals have had arguably inflated valuations that seem even more inflated given the recent downturn in the market overall.

“If streaming margins are deemed to be lower than expected and further in the future than expected, I wonder if prices on content acquisitions will moderate or even retreat,” Birenberg said.

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Still, many see a real value for studios and streamers to lock down deals with talent-centric companies like Imagine.

“A studio needs creatives to execute their IP like a kite needs wind. Without the right talent, the IP can fall flat and we’ve seen lots of examples of that in recent years,” David Offenberg, associate professor of entertainment finance at LMU’s College of Business Administration, told TheWrap. “All of the existing players in the streaming wars need to make sure they have access to the top talent, so having an ownership stake in the talents’ production companies is valuable for both strategic and financial buyers in this market.”

Imagine Entertainment is one of Hollywood’s largest independent production companies. Howard and Grazer founded the banner in 1986 and it has since become the home for influential projects such as “Apollo 13,” “A Beautiful Mind” and “Arrested Development.” More recently, Imagine helped produce Lin-Manuel Miranda’s feature directorial debut “Tick, Tick, Boom…” for Netflix starring Andrew Garfield, as well as Garfield’s Hulu murder mystery “Under the Banner of Heaven.”

Sharon Waxman contributed to this story.

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