The latest investment designed to bail out Relativity Media appears to be a lot smaller than reported in an initial media account last week — amounting to a minority investment, starting at $27.5 million in cash, rather than an outright sale worth up to $250 million.
Details of the anticipated investment by YuuZoo Corporation, a social media company based in Singapore, were revealed in a filing with the Singapore Stock Exchange.
The six-page document shows that YuuZoo will receive a 33.3% stake in Beverly Hills-based Relativity in exchange for an investment of $50 million. The first $27.5 million of the payment is supposed to be made in cash, while the remaining $22.5 million can be paid in cash or YuuZoo shares, which are currently trading at about 17 cents.
The document filed with Singapore authorities also describes the possibility of an additional $100 million investment by YuuZoo, which could be made within two years. That would give the social media, online commerce, and gaming company majority control of Relativity.
Relativity emerged from Chapter 11 bankruptcy in April, with founder and CEO Ryan Kavanaugh still in charge, but the company has struggled to find money to pay its creditors and to fund new film productions.
The company’s distribution partner, EuropaCorp, reported to shareholders last week that Relativity was in danger of losing its 50% stake in their joint venture after failing to pay its share of the quarterly overhead. (A Relativity spokesperson responded that it was EuropaCorp that owed money.)
Lawyers and other professionals who worked on Relativity’s Chapter 11 bankruptcy are also looking to get paid. They have filed claims for roughly $19 million in unpaid bills, but the special account set up by Relativity to pay them holds only about $8 million, sources say.
A press account about the Relativity-YuuZoo deal last Friday described the deal as an outright sale to the Asian company and said YuuZoo would pay “up to $250 million.” The new documents cap the deal at $150 million, but suggest it could amount only to the $50 million minority investment.
The regulatory filing says that the deal must clear others hurdles to be consummated. One condition is “completion of Relativity’s existing corporate debt restructuring.” No details of the restructuring were provided, but the requirement presumably includes winning the approval of Relativity’s previous creditors, who are already owed tens of millions of dollars.
Other pre-closing requirements are for YuuZoo to receive approval from the Singapore stock exchange and from its shareholders.
Relativity has previously been able to attract news accounts, suggesting it had lured crucial new investments, only to have those deals shrink, in the final analysis.
The company’s film releases after bankruptcy have been delayed multiple times. When “The Disappointments Room” and “Masterminds” finally hit theaters in recent weeks, they attracted only paltry audiences.
A weekend press release presents the YuuZoo deal in grandiose terms. While YuuZoo’s market capitalization amounted to a little more than $90 million on Monday, the release quoted an unnamed Relativity spokesperson as saying, “The market should, as recent analyst reports have stated, be valuing them at least 10x their current price.”
The statement added that YuuZoo “seemed to lose some of that valuation” because it had the distribution “pipe” for content — a network that it claimed can reach four billion consumers via smartphones, tablets, computers, and TV screens — but not the content to deliver. Relativity is supposed to fill that content gap.
The new partners seem to be thinking big, again, in another analogy offered by their press release. It said that “some market observers” were comparing the Relativity-YuuZoo deal to “the recently announced acquisition of TimeWarner by AT&T.” Those observers were not named.
“This deal has a tremendous fit where 1 plus 1 does truly equal 10,” said Thomas Zilliacus, executive chairman of YuuZoo.