New equity coin will fuel company's expansion

Legendary Entertainment has raised $443 million in equity, cementing the company’s status as one of the most well-capitalized production shingles in Hollywood.

Shingle raised the funds through investment firm Waddell and Reed Financial, one of the country’s oldest mutual fund firms, although one not widely known for its entertainment activities. Coin puts Legendary firmly in a position to grow as it transitions out of co-financing pics with Warner Bros. and focuses on developing its own slate.

Investors valued Legendary at $2.5 billion post-money, according to a person familiar with the matter. Deal gave Waddell a stake just south of 20%.

New funds will go toward “growth and working capital across its filmed entertainment and publishing divisions,” according to statement from Legendary announcing the deal Tuesday.

Legendary topper Thomas Tull has recently turned his company’s efforts inward, notably focusing on a slate of fanboy fare it develops inhouse, including “Pacific Rim,” “Godzilla” and “Seventh Son” (Daily Variety, Oct. 30). And Tull has raised a good chunk of change to do that: In April, Legendary secured $128 million in new capital and $150 million in debt. Company also assembled a $700 million credit facility last year.

In an environment where equity is very hard to come by, Legendary’s success at raising a relatively large amount of it speaks to investor confidence in his business plan and management style.

Company has scored with the revival of Warner Bros.’ Batman and “Hangover” franchises, as well as “Superman Returns” and “Clash of the Titans.” It also has films based on the videogames “Mass Effect” and “World of Warcraft” in the works.

While WB will release “The Hangover Part III,” “Man of Steel,” “300: Rise of an Empire” and “Jack the Giant Slayer” next year, the two companies have no projects lined up to co-finance thereafter.

Legendary and WB are expected to continue their relationship for years to come (the pair are in talks to extend their current distribution deal, which expires next year), but Legendary intends to use much of its coin to back its own movies, with WB distributing.

Since partnering in 2005, WB and Legendary have teamed up on 24 pics.

Financial observers say that robust entertainment companies are being valued somewhere between eight and 10 times their annual EBITDA. Lionsgate and DreamWorks Animation are both trading above 12 times their EBITDA, and some experts say that could be helping boost the market’s appetite for comparable operations.

Legendary’s healthy collection of intellectual property, studio distribution and expanding television operations have thus far appealed to investors and fueled speculation that Tull was mulling an initial public offering for next year. Legendary hasn’t had the same kind of luck in China, however, where financing for a Chinese production shingle fell through last year.

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