NEW YORK — Act One in the sale of bankrupt theater concern Livent Inc. closed Tuesday when Livent confirmed it had a deal with SFX Entertainment. But as Act Two begins and the deal is put before the U.S. Bankruptcy Court for approval, a new twist in the saga could easily emerge if another bidder comes forward with a higher offer.
SFX inked a definitive agreement to buy most of Livent’s assets for a price, thought to be slightly over $100 million. The companies did not disclose how much but said SFX would pay with a combination of cash, stock warrants and deferred payment rights.
The cash portion is thought to be roughly $80 million, although details won’t be disclosed until the two companies file with the bankruptcy court today. The stock warrants are valuable only if SFX’s stock rises significantly in coming years; the deferred payment right comes due in five years’ time.
Included in the sale are Livent’s theaters in New York, Chicago and Toronto as well as rights to current Livent productions “Fosse,” “Ragtime” and the Canadian version of “Phantom of the Opera” along with rights to shows in development such as “Seussical” and “Pal Joey.” Livent’s theater in Vancouver is not included.
SFX’s offer won out over rival bids from Cablevision Systems and Peter Holmes a Court’s Back Row Prods. Holmes a Court’s family owns the U.K. theater powerhouse Stoll Moss.
The big question is whether Cablevision or Back Row, or possibly another party altogether, will come forward when the bankruptcy court convenes in a few weeks to consider the bid. At that stage anyone can come forward with a new offer.
“This is the first stage of what will be a very public process to sell the assets,” said James Millstein, a partner with Cleary Gottlieb Steen & Hamilton, which is advising the creditors committee.
“In theater parlance, the curtain has just risen on the second act, and it could be a long second act,” he added.
“Let’s see if (the SFX deal) closes,” said one Broadway exec.
Holmes a Court confirmed his company had looked at Livent’s assets. “The shows are good, the theaters are good and the development potential of its other shows are valuable,” he said. Cablevision execs were not available for comment.
Millstein said creditors, who are owed about $200 million, were evaluating the offer and “trying to measure it against what our alternatives might be.”
Aside from the possibility of another bidder coming forward, Millstein said the creditors could conceivably “refinance the existing debt and try to make a deal to go it alone.”
Given the gap between Livent’s debts and the value placed on the company by various bidders, it’s hard to see how the creditors could structure such a deal, however. Much more likely is someone overbidding SFX in the bankruptcy court.
Advised on the sale by SG Cowen Securities, Livent is understood to have dealt only with those willing to make an offer for all of its assets (although no company was willing to include the Vancouver theater in its bid). That means offers for individual assets, such as the New York City theater on 42nd Street, would not have been accepted.
For SFX, completion of the deal would make the company and its Pace Theatrical subsid a major creative force on Broadway.
SFX executives were circumspect when asked how committed the company is to the Livent shows in development.
“Will we be a company like Livent was? No,” said Mike Ferrel, prexy and CEO of SFX Entertainment. “A large production company that takes a lot of risks is not our business model. We plan to make strategic and fiscally prudent investments in productions that become part of the SFX/Broadway road network. We have a different business model, a very considerable part of which is the business of presenting Broadway on the road.”
The deal’s effect on such current Livent Broadway shows as the Ford Center’s flagship tuner “Ragtime” will be more immediate.
One person familiar with the terms of the deal said “a restructuring, similar to the kind you saw on (Disney’s) ‘Beauty and the Beast’ will have to come.” Disney is planning to cut nonessential cast members and shrink the overall Broadway production of the 5-year-old “Beauty and the Beast” to fit in a smaller theater.
Meanwhile, road presenters fretted over how an already dominant presenter would treat them after growing stronger.
“Anytime you have one company controlling everything, you have to be concerned,” an independent presenter said. “It makes you wonder what will happen to boutiques like us, if independent presenters can’t get shows for what, like two years?”