The $900 million acquisition of Reese Witherspoon’s Hello Sunshine by private equity giant Blackstone Group is a big step toward the launch of a media holding company that will revolve around the three Cs: content, commerce and community.
Disney alums Kevin Mayer and Tom Staggs are guiding Blackstone’s investment in content ventures and will serve as co-CEOs of the unnamed holding company that will house Hello Sunshine and other banners. Mayer and Staggs told Variety on Monday that Hello Sunshine is the exemplar of the kind of production companies that they are shopping for at present.
“We want companies that are producing meaningful, category-defining content brands that resonate with their chosen audiences. We want to do that across multiple audience (sectors),” Mayer said. “There are a lot of those companies out there that would benefit from additional size and scale and to be linked up with like-minded media companies that have must-have content. We think there’s a big revenue lift that will come from tying some great companies together.”
Blackstone has committed to provide a $2 billion war chest for Mayer and Staggs — and as Staggs noted, that’s “just the start.” The pair would not comment on other acquisition targets, but it’s no secret that they have had discussions with Imagine Entertainment and are believed to have done so with LeBron James and Maverick Carter’s SpringHill production banner.
What is clear from talking to Mayer and Staggs is the scope of their ambition and their belief that the marketplace needs a strong independent content supplier. The pair are looking well beyond U.S. borders for deal prospects and business opportunities, pointing to strong demand for original streaming content extends to local and regional streamers as well.
“Around the world the voracious appetite continues unabated, which puts us into this arms-dealer positioning. We think it’s quite valuable,” Mayer said. The holding company also aims to assemble a strong bench of sales, marketing and distribution executives to squeeze as much monetization as possible out of the content and to scout for deals.
The direct-to-consumer e-commerce opportunities are key to the emerging company’s business model. But Mayer wants to make one thing clear: They have no plan to build a subscription streaming service of their own. That game, as Mayer learned from launching Disney Plus in 2019 and from his four-month stint as CEO of social media juggernaut TikTok last year, is out of reach .
“You should look to see us have multiple revenue streams beyond licensing and owning content. The great first step is to generate brands and franchises,” Mayer said. “We’re going to leverage that connection for other means” in line with the company’s stated focus on e-commerce transactions and building social communities around artists and brands.
Hello Sunshine was a good place to start the shopping spree because the company’s activity reflects what Mayer and Staggs see as the future of successful media brands. Headed by CEO Sarah Harden, Hello Sunshine is laser-focused on generating content produced by and for women. The company benefits from Witherspoon’s profile and its track record in producing high-end TV and movies. It also has a direct-to-consumer commerce relationship with its most avid fans, and a strong social media presence that is a good platform to launch content and initiatives.
“We we set out to build the company we tried to do it with a lot of intention,” Harden told Variety. “When people started to see our growth, we got a bunch of incoming calls from people who were interested. (Last year) we sort of regouped and said ‘Let’s be as thoughtful and intentional about setting the company up for its next phase of growth as we have been in this phase.’ “
Hello Sunshine is already on the cusp of another growth spurt as investments in unscripted content, animation prodcution and direct-to-consumer initiatives are coming to fruition. The focus on content created by women and for women has been an important differentiator at a time when so much of the cultural conversation has revolved around gender equity and diversity of voices in media.
“The flywheel is working,” Harden said of Hello Sunshine’s operations. “There’s really quality execution at every level from this team. We have a lot of visiblity into our future growth given the businesses we’re in.”
Hello Sunshine at present has about 65 full-time employees. All have some form of equity in the firm. “It’s a pinch-me day,” Harden said of informing staffers about the sale. “There’s been lots of tears of joy and surprise.”
Hello Sunshine “is right in the bullseye of the vision that Kevin and I have for this company: Category-defining content that commands a marketplace premium,” Staggs said. Pointing to the “Reese’s Book Club” digital content hub, he added, “We can build social- and commerce-driven businesses around Reese’s Book Club. This is the crux of the forward-looking company that we’re trying to build.”
Hello Sunshine and other acqusitions will continue to operate as standalone entities, but it will eventually be housed in an unnamed holding company that Mayer and Staggs will lead. The venture that Blackstone is backing is separate from an unrelated Special Purpose Acquisition Vehicle arrangement that Mayer and Staggs set with other investors to acquire the Beachbody fitness firm earlier this year.
Mayer and Staggs have heard the skepticism in the market about the $900 million valuation of Hello Sunshine. It’s a refrain they know well from their days as top business development and operational executives at Disney under former CEOs Michael Eisner and Bob Iger.
“Tom and I have done a lot of deals over the years. Each and every one of them we were claimed to have overpaid: Pixar, Marvel, Lucasfilm,” Mayer said. “We’ll let our track record speak for itself.”
Added Staggs, “We feel really good about the value of what we’re getting here. We’re getting an extraordinary management team. Reese and Sarah Harden are as good as it gets.”
Harden emphasized that the valuation was rooted in the company’s track record so far and projections for a slew of initiatives that have not been unveiled.
“We’re partnered with savvy financial buyers who have looked under the hood of this company,” she said. “I don’t think there’s any leaps of faith in this valuation. It’s a bet based on how well this team has executed over the last four and a half years.”
The deal terms call for Blackstone to buy out AT&T, Emerson Collective and other investors in Hello Sunshine since its formation in 2016. Blackstone is understood to be commiting $500 million in cash to the purchase. Witherspoon Harden and others will see some of their equity in Hello Sunshine converted to equity in Mayer and Staggs’ new venture. Witherspoon and Harden will also join the board of the holding company.
Harden said she had known Mayer and Staggs for about 15 years and has done transactions with during her previous stints as an executive at AT&T’s Otter Media, Chernin Group and News Corp. and Fox. She is eager to be a part of the mix of content-focused brands that Mayer and Staggs plan to assemble.
“To be able to work with Kevin and Tom and to look at really incredible, entrepreneur-built, innovative, forward-looking media brands is exciting,” she said. “We’re partnering with a mission-aligned buyer.”
(Pictured: Kevin Mayer and Tom Staggs)