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‘Hustlers’ studio STX Entertainment to merge with India’s Eros

Constance Wu and Jennifer Lopez in “Hustlers”
Constance Wu and Jennifer Lopez in a scene from STX film “Hustlers.”
(STX Entertainment)

STX Entertainment, the start-up film company that hoped to become the next major Hollywood studio, will merge with an Indian media and entertainment firm known for its massive library of Bollywood films.

Burbank-based STX, which made popular movies including “Hustlers” and “Bad Moms” but has also endured box office struggles, will combine with Eros International, a publicly traded Mumbai-based film studio that owns a major streaming platform.

The combined firm will be named Eros STX Global Corp. and will trade publicly on the New York Stock Exchange, the companies said Friday.

The companies described the all-stock deal, expected to close by the end of June, as a “merger of equals.” Existing Eros International shareholders will own about 50% of the combined company, while existing STX Entertainment shareholders will also own about 50%, with 338 million diluted shares outstanding, the company said.

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Eros International’s stock rose $1.09, or 56%, to $3.05 in trading on Wall Street. The shares have declined more than 60% in the last 12 months.

STX co-founder Robert Simonds will join the new company as chief executive and co-chairman, leading the firm alongside Eros International’s current CEO, Kishore Lulla, who will serve as executive co-chairman.

Simonds, in a memo to staff, said the deal would fuel global growth thanks to Eros’ robust film library as well as the combined company’s broad film distribution reach and access to filmmakers and actors, including in China.

Eros has a movie library with more than 3,000 Hindi, Tamil and other regional-language films. It also owns the streaming service Eros Now, which has rights to about 12,000 films in local languages. Eros Now has 188 million registered users and 26 million paid subscribers, according to the company.

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“The combination will create the first independent media company with the expertise and creative cultures of Hollywood and Bollywood, while also leveraging the important inroads both companies have made into the Chinese market,” Simonds wrote. “Together we will have the relationships, management expertise and resources to create new content addressing the largest and most attractive global markets.”

Executives were not immediately made available for interviews.

Founded in 2014, STX launched with major funding from China and private equity firm TPG Growth to support its bold ambitions. The studio hoped to tap what executives saw as a neglected niche in the modern film business by making midbudget movies driven by famous actors rather than well-known franchises. The studio also promised to take advantage of the burgeoning entertainment market in Asia.

But a series of flops, including 2019’s “UglyDolls” and the Diane Keaton cheer squad comedy “Poms,” raised concerns about whether the company would survive. The midlevel movies that once fueled box office revenue for studios have increasingly become the purview of streaming services such as Netflix.

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Leadership faced persistent questions about the company’s financial health after it canceled a planned initial public offering in Hong Kong in 2018 because of stock market turbulence amid a broader cooling of the China film market. The offering would have raised as much as $500 million.

In a further blow last year, STX co-founder and TPG Growth executive Bill McGlashan was charged in the Operation Varsity Blues college admissions cheating scandal. He was fired by TPG and stepped down from STX’s board of directors. The company, however, maintained that it was well-financed thanks to the continued support of investors including TPG and China’s Hony Capital.

In announcing the deal with Eros, STX disclosed a “revamped capital structure” that includes $125 million in fresh equity from new and existing STX Entertainment equity investors, including TPG, Hony and media giant Liberty Global. STX boasted “superior liquidity and a robust balance sheet,” including a $350-million credit facility led by JPMorgan, and generated $400 million in revenue last year, the companies said.

The combined company is expected to generate about $50 million in “operating synergies” within two years, they said.

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The deal comes at a challenging time for film studios, whose productions and release schedules are shut down indefinitely because of the COVID-19 pandemic. The spread of coronavirus infections has led to the closure of movie theaters around the world, including in China, the second-largest box-office market behind the U.S. and Canada.


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