STV Group, through its STV Studios subsidiary, has acquired 100% of the issued share capital of unscripted television production network Greenbird Media for approximately £24m, of which £21.4m was paid on completion.
London-based Greenbird is also a service provider, offering a back-office solution which lets creatives to focus on pipeline development and programme production.
According to a statement, the deal accelerates the growth of STV Studios by more than trebling the number of returning series, strengthening its existing rights catalogue.
Founded by television executives Jamie Munro and Stuart Mullin in 2012, Greenbird has built the largest independently-owned network of producers in the UK, with an archive of more than 2,000 hours of content, and will this year produce over 350 hours of new programming across 25 returning series.
Greenbird network companies are behind such shows such as LEGO Masters, The Hit List, Animal Casualty 24/7, The Misadventures of Romesh Ranganathan, Late Night Lycett and Mortimer & Whitehouse: Gone Fishing.
It directly owns majority stakes in two unscripted production companies, Crackit Productions (75%) and Tuesday’s Child (51%), founded and run by Elaine Hackett - an ex Endemol UK board member overseeing Big Brother - and Karen Smith - the former managing director of Shine TV and co-creator of Strictly Come Dancing - respectively. Tuesday’s Child in turn owns a majority stake in Interstellar (51%).
Greenbird also holds minority positions in a further 12 production companies, including Rumpus Media (40%), Glasgow-based Hello Halo (30%) and Flicker Productions (40%).
The acquisition will make STV Studios one of the largest production groups in the UK and accelerates the group’s overall diversification strategy.
STV Studios production labels will more than double from nine to 24, while the enhanced scale will also allow STV Studios to realise more value from a combined programme catalogue of more than 5,000 hours in the distribution and secondary sales markets.
The enlarged STV Studios will also pursue an international growth strategy to generate maximum value from its shows outside the UK, building on the recent success of LEGO Masters - 20 territories including the UK and US - and Bridge of Lies - 16 territories including the UK and Spain.
The group will have expanded bases in Glasgow and London, as well as offices in Belfast, Cardiff, Manchester and Brighton.
Following completion, Greenbird founders Jamie Munro and Stuart Mullin will join the board of STV Studios in the roles of chief commercial officer and finance and integration director, respectively, working alongside chief operating officer Paul Sheehan, under the leadership of studios managing director David Mortimer, with a brief to drive the expansion of STV Studios both in the UK and internationally.
The founders and creative leaders of the key Greenbird production companies will remain with their businesses under long-term incentive arrangements.
The deal comprises an initial cash payment of £21.4m, including £11.5m for the repayment of loan notes to Keshet at completion, alongside cash adjustment of £300,000, and the balance payable to the existing shareholders - equivalent to 86% of the equity - including Keshet’s entire equity interest.
Deferred consideration in relation to the balance of 14% of the equity, currently estimated to be £1.6m, is payable to the founders based on agreed earnings targets over the two years ending 31 December 2024.
The remaining consideration of circa £1m relates to surplus cash balances held by the majority companies - Crackit, Tuesday’s Child and Interstellar - at completion, which will be paid to the existing shareholders at the point in future when STV, through Greenbird, owns 100% of their equity or when monies are dividended by them to Greenbird.
On a proforma basis and in line with Greenbird’s ‘percentage of completion’ revenue recognition policy, Greenbird generated consolidated revenues of circa £32m, consolidated operating profit of around £3.5m and consolidated profit before tax of about £2.9m in the year ended 31 December 2022.
Greenbird’s gross assets as at 31 December 2022 were £18.5m. The total revenue generated by entities in which Greenbird held an investment in 2022 was circa £64m.
Greenbird is forecast to deliver revenue of £20m to 25m and operating profit of up to £3.5m during the second half of this year, which will be consolidated into the STV Group financial statements.
The enlarged STV Studios division is expected to deliver revenue of between £70m and 75m and adjusted operating profit of up to £6.5m this year, taking the STV Group well beyond its diversification target of achieving 50% of operating profit, to at least 60%, from outside traditional linear broadcasting by the end of 2023.
STV expects to deliver significant revenue and cost synergies across the enlarged STV Studios business of at least £750,000 per annum from 2024.
STV has funded the acquisition entirely from its existing £60m revolving credit facility. The group has also released £10m from its accordion facility to provide additional liquidity headroom, although does not currently anticipate using this incremental funding capacity.
The enlarged group’s net debt will be approximately £32m, which comprises net debt in the existing STV Group of circa £38m and cash balances in the Greenbird network of around £6m, of which £2m is available on completion.
STV chief executive Simon Pitts said: “This transformative acquisition represents a major step, adding significant scale and creative firepower to the group and immediately accelerating STV’s overall diversification in terms of both revenue and profit.
“We’re delighted to be partnering with Greenbird and to welcome their incredibly talented network of creative leaders to the STV family as we jointly aim to grow our production base in the UK and internationally.”
David Mortimer, managing director of STV Studios, said: “Over the last four years we have transformed STV Studios’ creative and commercial performance, so now feels like the right time to take our next big step towards becoming one of the UK’s most successful production groups.
“I’ve known and worked with many of the team at Greenbird and their associated companies previously and can’t wait to get on with the job of integrating these great production companies into the STV Studios family.
“Over the next few years, we will be making some huge television shows for broadcasters and streamers both here in the UK and around the world, so this feels like an exciting new era for STV Studios.”
Greenbird founders Jamie Munro and Stuart Mullin added: “We are hugely proud of the Greenbird incubator model we have built.
“It has given creatives space to flourish and deliver some of the most innovative, entertaining and loved programmes in the UK.
“Their creative power is unrivalled and has been recognised by viewers, critics, awards panels and through the volume of international sales that their shows have generated.”
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