Softbank Deal

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variety.com/2014/film/news/legendarys-deal-with-softbank-actually-worth-up-to-1-billion-exclusive-1201319513/

Eager to lock down content for its digital platforms, SoftBank Corp. announced Thursday a $250 million investment in Legendary Entertainment and the formation of a new joint venture. The deal is far larger, Variety has learned, and could actually be worth up to $1 billion.

According to a letter sent to Legendary’s shareholders on Oct. 1 to secure votes for the pact, SoftBank’s investment in Legendary is actually broken up into three stages that began with the $250 million investment, which is expected to close within a week.

Under terms of its deal with Legendary, SoftBank has the option to make two additional $375 million investments in the company through 2018, said shareholders who provided details of the letter to Variety.

After the three rounds of investments, SoftBank, one of Japan’s largest tech congloms, has the first refusal right to purchase Legendary outright, should Thomas Tull choose to sell the company.

The first $250 million investment gives SoftBank control of 10% of Legendary, which analysts say is worth around $3 billion.

Legendary declined to discuss terms of the deal. SoftBank also declined to comment.

SoftBank has been top of mind in Hollywood over the past week since reports that the company was looking to buy DreamWorks Animation.

However the deal with Legendary — and the formation of a joint venture with the company — signals that SoftBank is more interested in becoming a major player in Hollywood by helping turn Legendary into more of a full-fledged studio in return for exclusive rights to entertainment that it can push across all of its mobile platforms around the world, that includes Sprint in the U.S.

Until now, SoftBank has had rights to mobile games from Supercell and GungHo, but had no deals with traditional entertainment providers like TV or movie studios.

Legendary Entertainment, founded in 2000, is behind such films as “Godzilla,” “The Dark Knight” and “Pacific Rim.” The company has a new distribution deal with Universal Pictures after it recently ended an eight-year pact with Warner Bros. Legendary recently started expanding heavily into television and is growing its own digital companies like Chris Hardwick’s Nerdist Industries.

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Japanese internet and technology giant SoftBank Corp. has closed a deal to invest $250 million in Legendary Entertainment — a deal that could be worth as much as $1 billion through 2018, according to shareholders.

As part of the pact, the companies will form a joint venture designed to promote and create business opportunities for Legendary’s films, television shows and digital products, especially in China and India.

Given the kinds of companies SoftBank has invested in — among them, it owns Sprint and Japan’s third-largest mobile carrier — the SoftBank deal particularly points out plans to exploit Legendary’s content across over-the-top mobile platforms.

The move comes days after talks between SoftBank and DreamWorks Animation stalled. The company had been looking at purchasing the animation studio in a deal valued at around $3.4 billion.

Legendary has backed such films as “Godzilla,” “The Dark Knight” and “Pacific Rim.” It has a distribution deal with Universal Pictures that began this year after the company concluded a prior deal with Warner Bros. China has been a focus for Legendary, which had a hit in the market with “Pacific Rim.”

The company also has labored to create Legendary East, a joint venture designed to create tentpole films in China. It parted ways with original partners the Huayi Brothers in 2012 and brought on China Film Co. as its cabin-mate in 2013.

SoftBank’s investment will close this month, subject to certain conditions. In addition, SoftBank vice-chairman Nikesh Arora, who also serves as the CEO of SoftBank Internet and Media Inc., will be appointed to Legendary’s Board of Directors.

“Our goal at SIMI is to leverage SoftBank’s international platform and network of Internet and media partners to accelerate content creators’ digital strategies and extend their global reach,” Arora said. “Legendary is already a content powerhouse and we are very excited to make this investment and help them bring their incredibly successful film franchises and other exciting new media content to an even larger global audience.”

Arora joined SoftBank this summer from Google, where he was the company’s highest paid employee and served as its chief business officer.

Softbank has invested in a number of technology and internet companies such as Alibaba and Yahoo Japan.

The Raine Group LLC acted as financial advisor and Morrison & Foerster LLP acted as legal advisor to SoftBank. Martin Willhite, COO & General Counsel represented Legendary and O’Melveny & Myers LLP acted as outside legal advisor.

“Masayoshi Son has built SoftBank into one of the world’s most respected companies,” said Legendary chief Thomas Tull. “With the arrival of Nikesh and the launch of SIMI, they have a great opportunity to extend their reach into media and entertainment. We are excited to be one of SIMI’s first partners and look forward to working together to deliver the next phase of Legendary’s growth.”

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SoftBank, the Japanese telecommunications conglomerate that recently flirted with buying Jeffrey Katzenberg’s DreamWorks Animation Studios, appears to have found another monster opportunity in Hollywood. Sources confirm that the company is in talks to acquire a stake in Thomas Tull’s Legendary Entertainment.

The deal would involve a sizable investment, but would not be for a majority share in the company, according to an individual with knowledge of the discussions.

The source said that the Legendary talks, first reported by the Hollywood Reporter, have been ongoing for weeks and were not a result of any potential fallout between SoftBank and DWA.

SoftBank, which owns Sprint, may still broker a content deal with the toon studio. Acquisition talks could also begin again, those close to the companies say.

But the interest of SoftBank in Legendary clearly indicates the Japanese player is getting serious in Hollywood.

Legendary recently scored with the reboot of “Godzilla,” with the film earning more than $525 million worldwide. The film is now selling well on homevideo, as well.

Last year, Legendary moved its distribution deal to NBCUniversal after eight years co-financing and distributing films at Warner Bros., where it released “Godzilla,” along with “Pacific Rim” and the “300” pics, and co-financed the studio’s Batman and Superman films.

Analysts have valued Legendary at around $3 billion, due not only to its box office successes but its expansion into new media and television, as well.

Other reasons why SoftBank might be interested in Legendary:

– A long-awaited greenlight in China. In April, China Film Co. agreed to co-finance Legendary’s “Warcraft” and “Seventh Son,” investing at least $10 million in the tentpoles. Deal was made with Legendary East, Thomas Tull’s Chinese film arm. The deal marks the first time China Film Co. has taken a stake in Hollywood films. If the Legendary productions are approved for Chinese release, China Film Co. will distribute the films there with distribution and marketing support to be provided by Legendary East and Universal Pictures. The fantasy film “The Great Wall” will be Legendary’s first film to be produced in China, with “Hero’s” Zhang Yimou set to direct. When NBCU brokered its deal with Legendary, the move was seen as a way for Legendary to provide Universal with an open door into China, through a three-year co-production pact with China Film Group.

– Expansion into new media. In addition to owning Chris Hardwick’s Nerdist Industries, Legendary acquired Felicia Day’s Geek & Sundry to bolster its online fanboy cred and develop TV shows with Day. Legendary launched its in-house digital division in 2013, most recently buying rights to produce a digital series based on Capcom’s videogame franchise, “Dead Rising,” for Crackle and Content Media (the “Mortal Kombat” web series).

– An active TV division. Last year, Legendary tapped former Warner Bros. TV chief Bruce Rosenblum to start its own TV operation, which has sold a number of pilots to networks including CBS, USA Network, Syfy and Netflix.

– Theme parks. Through Universal, Legendary will get to expand its brand through its partner’s theme parks in Hollywood, Orlando, Japan and Singapore, with discussions already taking place on the first attractions.

– Tentpoles. And the company’s film slate continues to grow with an impressive roster of projects, including sequels to “Godzilla” and “Pacific Rim;” the Gothic horror film “Crimson Peak,” from Guillermo del Toro; “Warcraft,” based on the popular game franchise; a “Hot Wheels” movie with Mattel; and “Skull Island,” based on the world of King Kong. It’s also co-financing a number of Universal releases like “Dracula Untold” and next summer’s “Jurassic World.”