Ascent Entertainment Group has sold a controlling interest in Beacon Communications to a management consortium headed by Beacon chairman Armyan Bernstein and venture capitalist Kevin O’Donnell.
The buyback, which has been in the works for some time (Daily Variety, Jan. 8), will see Beacon reverting to private ownership, with Ascent retaining a minority stake in the company.
Beacon, currently in production on Universal Pictures’ “End of Days,” starring Arnold Schwarzenegger, is planning to expand into new areas of the entertainment biz, including television production and talent management, as part of the deal.
Ascent bought Beacon for $29 million in 1996.
It was unclear Wednesday how much O’Donnell and Bernstein had paid for their majority stake, although Ascent will receive a mixture of cash and an upside on future film projects and library values.
In addition to buying out Ascent, Beacon said that O’Donnell’s investment group O’Donnell and Associates was making a capital investment in Beacon that would significantly increase the value of the company.
“We get to buy back our company and take it private, as well as stay in partnership with Ascent. Most importantly, we get to be partners with Kevin O’Donnell. For all of us, it’s an ideal marriage of management, capital and new technologies,” Bernstein said.
Beacon president Marc Abraham and chief operating officer Thomas Bliss are part of the management buyout team and will remain in their posts. Beacon exec VP Jon Shestack ankled the company earlier this month to join Artisan Entertainment.
O’Donnell is a venture capitalist who helped found Internet access company Earthlink Network, which had a stock offering last week. O’Donnell raised $9 million selling a small part of his stockholding in the offering, but he retains a 6% stake worth about $138 million at Earthlink’s current price.
Foothold in biz
O’Donnell could not be reached for comment, but he is evidently viewing Beacon as his foothold in the entertainment business, and sources said that he has plans to make further acquisitions.
According to Bernstein, Beacon and O’Donnell have discussed moving Beacon into television production and talent management. Bernstein has strong links to actors such as Harrison Ford and Kevin Costner, and the company is keen to exploit his ties. “What we’ve talked about (with O’Donnell) is using Beacon as cornerstone to build a (diversified) entertainment company,” Bernstein said.
On the domestic distribution side, Bernstein said that Beacon would remain partnered with Universal Pictures, where it has a first-look deal. Beacon licenses the foreign rights to its pictures itself. Bernstein said that he expected production at Beacon to remain steady, at between three and five pictures a year.
Aside from “Days,” Beacon is producing the Costner starrer “For Love of the Game,” which U fully financed, and “Lazarus and the Hurricane,” starring Denzel Washington. Earlier this month U backed out of Beacon’s “13 Days,” and the indie set the pic up at Sony instead.
Small is beautiful
Beacon has produced lower-budgeted pics in the past, including “The Commitments” and “Sugar Hill.” Bernstein said that he still intended to make smaller pics. Due for release this March through October’s Rogue Pictures is the comedy “G’s Trippin.”
Sale of a majority stake in Beacon is likely to be the first step in a long-awaited restructuring of Ascent, Wall Streeters said Wednesday. Several influential investors have bought into the company over the past year, including Australian media mogul Kerry Packer in partnership with Triarc Cos., media money manager Mario Gabelli, Capital Research and hedge fund manager Leon Cooperman.
Most have been pressing for Ascent to break itself up, arguing that the company’s ownership of Beacon, a hotel video operation and two sports teams did not make sense. Ascent chairman Charlie Lyons indicated earlier this month that the company was “exploring ways to create value for (its) shareholders.”
Lyons was in a board meeting and unavailable for comment on the Beacon deal Wednesday, but Wall Streeters say a bigger deal for the sports teams is believed to be close. Ascent stock has been inching up in the past two weeks and closed up 37¢ to $10.50 Wednesday.
One scenario circulating on Wall Street is that either Fox or Liberty Media, or both companies through their Fox/Liberty Sports Network joint venture, will buy the sports teams. Liberty is already a shareholder in an Ascent subsidiary building an arena in Denver for the hockey and basketball teams.
Several people close to Liberty are already connected with Ascent, such as former Liberty CEO Peter Barton. Liberty execs could not be reached for comment Wednesday, and a spokesman for Fox’s parent, News Corp. was also unavailable.