In an acquisition announced on Wednesday, two children’s media companies are joining forces to create a global animation and children’s digital media company with an end-to-end animation network.
Genius Brands International, Inc. (Nasdaq: GNUS) is set to acquire WOW! Unlimited Media (TSX-V: WOW) for approximately $53 million in cash and stock in a deal that will grow their pipeline and more than $62 million in secured future revenue.
WOW! Unlimited is an animation production company that has produced for Netflix, Amazon Prime, Sony, Hulu and Dreamworks, among others, according to the press release. It’s revenue from July 2020 – June 2021 was $56.4 million and its EBITDA was $5.1 million. It has projects in the next year that will total more than $62 million.
Pursuant to the agreement, WOW! Shareholders will receive 0.271 of a common share of Genius for each share of WOW! and C$1.169 in cash, which implies a value of C$1.623 (US$1.313).
The transaction will allow the companies to have an end-to-end animation system by adding two studios – Frederator Studios, which produced Adventure Time, FairlyOdd, Parents, Powerpuff Girls, Dexter’s Laboratory, Castlevania as well as Mainframe Studios which produced Madagascar – a Little Wild and Barbie Dreamhouse. Accordingly, this will create a “captive animation production studio that can be leveraged for in-house production of Genius Brands’ properties, thus driving costs synergies.”
This acquisition will fast-track Genius Brands’ financial growth and expand their reach in the global children’s entertainment market in part because of WOW!’s large social media presence including more than 2,500 ad-supported YouTube channels and more than 1 billion views on Frederator’s YouTube channel. WOW!’s production facilities also allow for profitable synergies for the new companies.
Some WOW! content will be shown on Kartoon Channel, products and licensing. WOW!’s high performing content includes Castlevania (Top 10 on Netflix) and Bee and Puppycat (more than 1 billion impressions on YouTube and social media). While some of Genius Brands’ content includes Stan Lee’s Superhero Kindergarten, Shaq’s Garage, Rainbow Rangers, Llama Llama, Thomas Edison’s Secret Lab, as well as its licensed content.
The deal will also allow for the expansion into high growth areas, such as a highly-profitable, full-service animation sub-contract studio, expanding audiences, and adding YouTube business. Furthermore, the monetization of some of WOW!’s in-house brands will also help costs.
CEO of WOW! Michael Hirsch will join the Genius Brands Board of Directors, while he continues his other responsibilities.
WOW!’s Canadian content operations will remain as a separate Canadian controlled business. Moving production to Canada will help via incentives and tax credits.
Genius Brands’ new Kartoon Channel and Kartoon Classroom are available in more than 100 million U.S. television households through its various distribution platforms
WOW! is represented by Dentons and Evolution Media Capital and Cormack Securities Inc. acted as its financial advisor. Genius Brands is represented by Norton Rose Fulbright.
Shares of both companies were mostly trading higher on Wednesday. On October 22, Genius Brands’ stock price was $1.34, the day before the announcement its stock was $1.87 and on the day of the announcement it was $1.52. WOW!’s was C$1.30, C$1.30 and $1.50, respectively. Genius Brands’ stock likely rose on Oct. 25 after it announced that it was going to host an investor call for a positive business development and WOW!’s increased after the deal was announced.
