The Arena Group (AREN) -) has announced a strategic partnership to dramatically expand its position in the video industry through a transaction with Bridge Media Networks. The company has signed a binding letter of intent with Bridge Media Networks’ parent company, Simplify Inventions, and its founder, Manoj Bhargava, founder of 5-hour ENERGY, which, when consummated, is expected to vastly expand its video capabilities in digital streaming, OTT, OTA, CTV, and Free Ad Support Television (FAST) channels. The deal is subject to completion of due diligence, stockholder approval, the receipt of any required regulatory approvals and certain other closing conditions.
The existing assets of The Arena Group will be combined with the video programming, distribution, and production assets of Bridge Media Networks, including its two 24-hour networks, NEWSnet and Sports News Highlights, as well as the automotive and travel properties Driven and TravelHost, further expanding The Arena Group’s vertical business ecosystems.
The Arena Group intends to use a portion of this cash to reduce its debt by $20 million from current levels. B. Riley Financial has agreed to extend the maturity of the remaining debt held by it from December 31, 2023 to December 31, 2026 at a fixed rate of 10%.
As part of the proposed transaction, Simplify made a five-year guaranteed advertising commitment of approximately $60 million from a group of consumer brands also owned by Simplify, including 5-hour ENERGY, and the Bridge Media Networks operations. As consideration, Simplify will receive $25 million of preferred stock at a 10% non-cash payment-in-kind (PIK) coupon and with a term of five years from the closing date and common equity which will represent approximately 65% ownership of the combined company on a fully diluted basis based on $5 per share.
“This strategic combination dramatically accelerates our planned expansion across the video ecosystem. Our immediate opportunity to create, distribute and monetize premium video content across all linear, digital and connected ecosystems provides a lucrative opportunity for The Arena Group. The production capabilities and opportunities with advertisers will further diversify our offerings,” The Arena Group Chairman and CEO Ross Levinsohn said.
“We also have added a dynamic and successful investor and entrepreneur to our company. The innovative business combination with Bridge Media Networks, contemplated in today’s announcement, promises the next exciting phase of our evolution. We believe the result, once the proposed transaction is complete, will be a well-capitalized company, poised to grow rapidly with leading digital and video offerings that will resonate with advertisers.”
Bhargava is the founder and CEO of Innovations Ventures LLC, the company known for producing the 5-hour ENERGY drink. Simplify Inventions LLC, IV Media LLC and Bridge Media Networks LLC are all founded and led by Bhargava.
He is a global philanthropist and is dedicating most of his wealth to help the poorest third of the world. He also owns or is a major investor in other companies, including HANS Premium Water, Diagnostic Green, Stage2 Innovations, and Bleecker Street Entertainment.
“This combination of broadcast, digital and brands will be ‘one plus one is eleven’ – not two or even three. And we’re just getting started,” commented Bhargava.
In addition to its agreement with Simplify, The Arena Group has extended its debt facility with B. Riley Financial for three years at a fixed rate of 10%. The company will use a portion of the cash it receives in the Simplify deal cash to reduce its debt by $20 million from current levels.
"We believe this is a transformational transaction for The Arena Group, combining an experienced management team with a history of making accretive acquisitions with a well-financed partner who shares the vision that the media space is ripe for investment and opportunity," B. Riley Chairman and CEO Bryant Riley added.
The Arena Group makes a strategic partnership
The Arena Group expects that the proposed strategic transaction will include the following key components:
- The Arena Group will acquire and operate Bridge Media Networks’ network business, which includes two 24-hour networks, NEWSnet and Sports News Highlights, which have 35 OTT distribution relationships and are distributed on more than 100 owned and affiliated linear television channels across 46 states.
- Bridge Media Networks will contribute its automotive and travel brands, Driven and TravelHost, which will anchor new vertical arenas on The Arena Group’s technology platform.
- The combined entity will operate within The Arena Group and is expected to expand its consumer reach, product offering for advertisers, and further diversify its revenue across one of the fastest-growing segments in the media industry: OTT, CTV, and FAST channel programming.
- As part of the transaction, The Arena Group will receive a $50 million cash investment, a five-year guaranteed advertising commitment of approximately $60 million from a group of consumer brands also owned by Simplify, including 5-hour ENERGY, and the Bridge Media Networks operations. As consideration, Simplify will receive $25 million of preferred stock at a 10% non-cash payment-in-kind coupon with a term of five years from the closing date, and common equity which will represent approximately 65% ownership at $5 per share of the combined company on a fully diluted basis.
“Our continued progress in growing our scale and driving efficiency was a key factor in our ability to achieve this milestone transaction,” said Levinsohn. “While many in our industry have seen their businesses shrinking in the second quarter, we grew revenue 9% year-over-year, overcoming industry-wide challenges in the digital advertising ecosystem.”
The transaction is expected to close in the fourth quarter of 2023, subject to negotiation of definitive agreements, the completion of due diligence, the approval of The Arena Group’s shareholders, the receipt of any required regulatory approvals and certain other closing conditions.
The Arena Group owns TheStreet.
The Arena Group delivers a strong Q2
The Arena Group delivered a strong quarter with top-line revenue growth and improvements in profitability and key operating metrics. In the second quarter, the company once again generated top and bottom-line improvements growing revenue by 9% year-over-year while reducing total operating expenses by 2% during the same period, leading to a 34% improvement in gross profit, a $2.7 million improvement in net loss, and a $4.1 million improvement in adjusted EBITDA compared to Q2 2022.
The Arena Group’s Q2 revenue increased by 9% to $58.8 million compared to $53.8 million in the prior year period. Digital advertising revenue increased by 19% to $29.3 million from $24.7 million in the prior year period.
This was aided by the company’s programmatic CPMs outperforming industry benchmarks by 41%, according to STAQ Benchmarking, a market-norm reporting service provided by Operative.
Total print revenue increased 9% to $20.4 million compared to $18.7 million in the prior year period. Gross margin improved to 37% compared to 30% in the prior year period.
In addition, operating expenses decreased by $0.8 million or 2%, to $36.0 million from $36.8 million in the prior year period. Net loss also narrowed by $2.7 million, or 12%, to $19.5 million from $22.2 million in the prior year period.
Q2 2023 included approximately $14.7 million in non-cash charges, including stock-based compensation, amortization of platform development and intangible assets, and other non-cash charges. Adjusted EBITDA improved significantly from a loss of $4.2 million in Q2 2022 to a loss of $76,000 in Q2 2023.
“We have continued to diversify our revenue streams, growing eCommerce from a nascent business into a growth engine, and we expect further expansion through the balance of the year,” according to Levinsohn. ”We focused on operational efficiency and reduced our total operating expenses by 2% from the prior year period even as we grew revenue by 9% year-over-year, driving a $6.3 million improvement in our loss from operations. Combined with a significant improvement in our gross margins, we are making steady progress towards achieving sustainable profitability.”
Some operational highlights include:
- The Sports vertical, anchored by Sports Illustrated, saw the expansion of several key properties including SI Golf and FanNation. The company launched an F1 Formula Racing site which is now the second largest F1-focused site after just eight months, according to data from Comscore and MRI-Simmons.
- Sports Illustrated Swimsuit’s 2023 launch more than doubled traffic as compared to the prior year. The announcement of the four covers – Martha Stewart, Megan Fox, Brooks Nader, and Kim Petras – and subsequent launch events in New York and Florida garnered over 108 billion media impressions and over 13,500 articles written about the release, according to data from Comscore and SimilarWeb. The group also saw record online digital advertising revenue, nearly tripling last year’s numbers.
- The Finance vertical, anchored by TheStreet, had a record quarter with 38 million monthly average pageviews, according to Google Analytics, an increase of 31% as compared to the prior year quarter. TheStreet launched partnerships with Tom Lee’s FundStrat Global Advisors and Tornado to expand its content base and reach a broader audience.
- The Lifestyle vertical, anchored by Parade and Men’s Journal, saw an expansion of publishing partners covering new content channels such as entertainment, astrology, sneakers, wine, and streaming TV. Parade continued to drive year-over-year traffic growth, with a 33% increase in monthly average pageviews as compared to the prior year quarter, according to Google Analytics. Through an exclusive licensing deal, the weekly and popular podcast Club Random with Bill Maher is now featured by Men’s Journal.
- The company announced that it has signed an agreement with acTVe Action Sports, LLC to launch five new FAST channels featuring its Adventure Network brands including Surfer, Powder, and BikeMag, with potential to expand to additional brands.
