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Raine Group to Invest $100 Million-Plus in Imagine, Partners Eye Expansion (EXCLUSIVE)

Imagine Entertainment, the production powerhouse led by longtime partners Brian Grazer and Ron Howard, is poised for a significant expansion, powered by a $100 million-plus investment from the Raine Group under a new partnership agreement, according to multiple sources familiar with the impending deal.

The arrangement anticipates building Imagine into a major media player with other investors as part of the transaction, said two individuals familiar with the pact. The deal has yet to be signed but is just days away from being finalized.

Raine, the 6-year-old New York merchant bank, has ready access to capital and myriad potential partners. While the new allies have no current acquisition targets, they will scout out other media assets for acquisition on an opportunistic basis. In the near term, the $100 million infusion will help Imagine generate new film and television projects.

The new partnership will leave producer Grazer, 64, and director Howard, 61, atop the company they founded 30 years ago, retaining all creative control. The company that brought the world “The Da Vinci Code,” “Parenthood,” “Friday Night Lights” and Oscar winner “A Beautiful Mind” will be actively looking to grow its already significant footprint in Hollywood.

Imagine’s Grazer and Howard will sit on a newly formed board with Raine partner Joe Ravitch, and others, according to two sources. A formal announcement of the agreement is expected as early as this weekend. Officials from Imagine and Raine declined comment.

It is believed that the Raine investment in Imagine will impact the company’s three-decade long production and distribution deal with Universal Pictures, which expires at the end of 2016. One likely scenario is that Imagine would move its film pact to 20th Century Fox, which has been the studio home for 16 years of Imagine’s television offerings. The two parties are currently in talks to extend the Imagine-Fox TV deal, which also runs out this year. Imagine is the producer of Fox’s hit show “Empire” and was behind the popular series “24,” which is currently being rebooted.

Imagine, which has been struggling at the box office recently with such misses as “In The Heart of the Sea,” is the latest in a string of established producers that have been on the hunt for independent financing and, in some cases, new distribution arrangements, as Hollywood’s risk-averse studios have slashed or downsized many of their once-lucrative production pacts. The major studios continue to put most of their money, instead, into big-budget sequels, reboots and global franchises that can generate billions of dollars in revenue.

Though Universal  has been Imagine’s main backer and distribution partner for 30 years, Grazer and Howard, like many other top-tier producers, have in recent years been forced to forage for production dollars. They had to cobble together independent funding for their mid-budget racing film “Rush,” released in 2013.

Other producers have found themselves chasing indie coin outside the studio system. Thomas Tull’s Legendary Pictures, which has been struggling to make winning films, was just acquired by China’s giant conglomerate Wanda Group in a deal that valued the production company at $3.5 billion. Steven Spielberg recently kicked in $50 million of his own money alongside a $200 million investment by Jeff Skoll’s Participant Media to help jump-start Dreamworks, under the new moniker Amblin Partners. And, while it was scrambling to raise new money, the Weinstein Co. was forced to lay off dozens of employees and saw some top executives leave.

Over the past six years, Raine has been working hard to become a more significant player and raise its profile. The merchant bank has become increasingly active in major media and sports deals, moving beyond an advisory role to invest its own money and money gathered in two investment funds.

Founded by Wall Street veterans Ravitch and Jeffrey Sine, the bank last year assisted former Microsoft CEO Steve Ballmer in his record-setting $2 billion purchase of the Los Angeles Clippers. Raine also worked on the pending five-year, $500 million investment by Perfect World Pictures in the movie slate at Universal Pictures.

Previously, it advised WME on its purchase of IMG, creating a super-agency that now has an interest in not just Hollywood entertainment but sports, fashion and a roster of other endeavors. The Raine partners have a longstanding relationship with WME co-chief Ari Emanuel, who seven years ago helped Ravitch and Sine launch their business.

Raine has invested in multiple companies itself, taking stakes in Vice Media, Important Studios (the creator of “South Park”), Zumba Fitness and Margaritaville, the hotel, restaurant and lifestyle brand created by musician Jimmy Buffett. Raine’s venture capital investments include the lifestyle network Tastemade, social TV platform Whipclip, and mobile game developer Super Evil Megacorp.

The New York Times earlier this month reported that Raine had also helped broker a deal in which China Media and partners paid $400 million for a 13% stake in City Football, the parent of Britain’s Manchester City soccer team.

As a banking adviser, it has been involved in the sale of STATS by Fox and the Associated Press, the launch of the film and television studio STX Entertainment and Softbank’s acquisition of Brightstar.

The bank has substantial assets to invest. It announced a year ago that it had raised $850 million for Raine Partners II, an equity fund that followed on Raine Partners I, which invested more than $400 million in 12 companies. Raine distinguishes those two funds from a separate venture fund and a hedge fund.

The operation has other ties to the media business. A year ago, it brought on Tom Freston, the former Viacom Entertainment CEO and founding chief executive of MTV, as a senior adviser. He joined other advisers, including Demand Media CEO Richard Rosenblatt, former NFL Network CEO Steve Bornstein, digital media entrepreneur Mika Salmi and Eva Jeanbart-Lorenzotti, founder and CEO of luxury goods retailer Vivre.

Raine has offices in Los Angeles, New York, San Francisco and Shanghai and last year announced that its European efforts would be headed by music industry veteran Fred Davis.

Grazer and Howard represent one of the best known filmmaking teams in Hollywood. They got together while still in their 30s, co-producing the Howard-directed “Night Shift” in 1982. They quickly followed up with the 1984 hit “Splash,” which Grazer co-wrote and produced and Howard directed. “Splash” earned Grazer an Oscar nomination for original screenplay. Howard would later win the director Oscar for “A Beautiful Mind.”

The team has notched many successes over three decades, with Howard currently in post-production on “Inferno,” the next installment of the popular screen series based on Dan Brown’s novels which began with “The Da Vinci Code.” Also coming from Imagine this year: a sequel to 1990’s “Kindergarten Cop,” a biopic of the soccer star, “Pele: Birth of a Legend,” and “Low Riders,” an Eva Longoria-starrer set in Southern California’s Latino barrios. In 2017, the company has slated the fantasy thriller “The Dark Tower” with Idris Elba and Matthew McConaughey and “Mena,” a Tom Cruise vehicle centered on a tangle of drug runners and the CIA in the 1980s.

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