In early 2018, the legendary film company founded by Harvey Weinstein and Bob Weinstein was in jeopardy.
Several women accused Harvey Weinstein of sexual assault, coupled with years of mismanagement and corruption that have been hidden from the public’s sight, leading this company to produce “The White House Butler”, “Paddington Bear” and “Very Little The production companies of films such as Secret Service suffered heavy losses. The bank is preparing to cancel the mortgage foreclosure of the film it invests in, and this top film company is about to fall apart.
On February 24, 2020 local time, New York, USA, former Hollywood producer Harvey Weinstein arrived in court.Image source: Visual China
There was a lot of discussion in Hollywood film circles for a while, and some people even hope that when most film companies turn their attention to blockbuster films, this well-known independent film company is still supporting talented directors such as Quentin Tarantino in shooting non-mainstream medium-budget films. It can be like the name on the bride assassination list in “Kill Bill” (a revenge film produced by Tarantino and Weinstein).
However, Weinstein Pictures has found a heroic savior. He is a restructuring expert from Texas, USA, who has never set foot in the film industry. This is really surprising.
In July 2018, Andy Mitchell, CEO of Lantern Capital Partners, purchased Weinstein Pictures’ bankruptcy assets for US$350 million in cash and assumed debt.
Andy Mitchell once helped Southern California Edison Electric Power Company and General Motors Finance Company through the financial crisis, and successfully resurrected a zinc recycling company, a school supplies retailer, and a notorious timeshare seller.
Veterans in the film industry predicted that no one would spend money on an institution that was once named after Weinstein.
To their surprise, in the first year after Lantern bought Weinstein Films, Mitchell personally ran the company and obtained extremely high box office, successfully attracting first-class partners and a celebrity chief. The executive officer joined and restarted the production of movies and TV shows.
He also sold movies in the movie library at a high price, because people who are not living at home like to watch movies such as “Scream 3” and “The Line of Happiness Behind the Dark Clouds”.
(At the same time, Harvey Weinstein was found guilty in early 2020 and sentenced to 23 years in prison for rape and sexual assault.)
New name, new weather
At the close of the market on July 15th, Mitchell announced a major decision: the company changed its name to Spyglass Media Group in 2019 and sold most of the films in its film library (277 films) to the producer of Lionsgate, which owns popular movies such as “City” and “The Hunger Games,” and owns the Starz cable network.
Lionsgate will also invest a new amount of money into Spyglass, specifically for the production of new movies and TV shows, in exchange for a 20% stake. Mitchell’s Lantern holds the most shares, and the remaining shares are held by a few existing investors, including Warner Bros., Cineworld (owner of Regal Cinemas), Eagle Pictures of Italy, and CEO of Spyglass, former MGM CEO Gary Barber.
Mitchell was responsible for the first year of operations before handing over the company to Barber. He is still a member of the company’s board of directors, and through Lantern’s investment, he became the company’s majority shareholder.
Andy Mitchell, the trader who acquired the bankrupt assets of Weinstein Pictures. Image source: Courtesy of Lantern Entertainment
This transaction has officially made Spyglass a cash cow. While ensuring that the previously notorious company name ceases to exist, it also integrates the series of films created by the Weinstein brothers during the company’s heyday and their tradition of cultivating independent filmmakers. Keep it for continuation.
In an in-depth interview with Fortune magazine, Mitchell stated that selling the film library will allow his investors, Warner, Eagle and other shareholders to invest in Spyglass for every dollar they invest in, “receive substantial profits.” “.
In short, the benefits of this transaction to Spyglass far exceed the $350 million that Mitchell spent to save Weinstein Pictures. However, the person in charge did not disclose the specific purchase price.
Most importantly, Spyglass will have sufficient funds and intellectual property rights to produce independent films. You can either follow Weinstein’s old rhythm, or you can choose the best partner of the brothers-from low-cost to about $50 million in artistic films.
Spyglass reserves the right to make movies. For example, the upcoming “Scream 5” is the latest work in the series, and “Hunter Chaser” is in the pre-production stage. It also continued to co-produce its hit reality TV show “Skybridge Proud” (season 17 was just completed by Spyglass) with the Bravo network under NBC Universal.
Spyglass retains the intellectual property rights of all movies in the film library to expand or remake the previous series of movies. The new works in the “Ghost Chaser”, “Very Little Agent” and “Screaming” series are all highly anticipated.
Mitchell is also working on making an inspirational film that inherits the classic “Chariot of Fire”. The film is adapted from the best-selling book “Riptide Boys” and tells the story of the Washington University rowing team winning the gold medal at the 1936 Berlin Olympics.
Mitchell said: “We will be a pure production company, producing five to six movies and a similar number of TV shows a year. The most important thing is quality, not quantity. Big production companies spend a lot of money. Keep everyone busy. The pressure is not small. They have to make 20 movies a year, and they have to fight to continue shooting “Star Wars” or “Avengers.”
This leaves a lot of room for Spyglass. He added: “We are willing to accept the creative space challenges that the big production companies don’t pay much attention to.”
Background story 1: The only bid
Although Mitchell said that he knew nothing about Hollywood at the time, but from a purely commercial point of view, the Weinstein incident only provided the kind of opportunity he valued.
He said: “Let’s find people who have to get out and get into trouble.”
In November 2017, one month after the New York Times revealed that Weinstein paid a hush fee to the woman who made the accusation, Mitchell received a call from an advisor on behalf of creditors.
He said: “We don’t know people in the show business, but we know people who are good at restructuring.”
Mitchell began to study the financial situation of Weinstein Pictures to determine whether Lantern should bid.
Mitchell told Fortune: “It is obvious that Harvey has never made money, he is just good at financing. No one in the company makes money except Harvey and Bob.” He was shocked by their extreme luxury. He said: “Their drivers are also equipped with drivers, and Harvey will ask for multiple scripts for the same movie. This is the case with “Riptide Boy”.”
According to Mitchell’s memory, the company owed various expenses, including the cost of the cast and crew, the film company that assisted them in producing the film, and even the rent of the warehouse. The warehouse is full of various items, from scripts to old props.
As the Weinstein brothers were busy fighting for new funding, film production was delayed. Banks increasingly think that the production company has poor credit.
Mitchell said: “After the scandal broke out, Weinstein Pictures went from an insolvent company to a company that cannot survive.”
After the scandal broke out, among the outside directors, including billionaires such as Paul Tudor Jones and Mark Lasley, only Tunisian producer Tarak bin Amal, who holds Eagle Pictures in his hands, served as advertising Lance Melov, head of mergers and acquisitions at the giant WPP, did not leave.
Both Ben Amal and Melov serve as directors, protecting their companies’ equity in Weinstein Pictures. Although the investment has been slumped, they still carried out a round of campaign to save Weinstein Pictures. It is their efforts that make Mitchell continue to pay attention to Weinstein Pictures.
Ben Amal said: “We don’t want to wake up all at once and find that the creditor adviser has driven away the buyers Andy and Milos Blajovic.”
Mitchell believed from the beginning that companies can only be rescued through bankruptcy.
He said: “I told Lance and Tarlac about this. If you buy outside of the bankruptcy process, what you buy is the company’s shell, the company’s identity. You will be sued for what the company has done in the past. You took over all the company’s problems.”
But he is also very fond of these assets and believes that no competitor will purchase them outside of the bankruptcy process.
He said: “Weinstein Pictures has a big IP, but I don’t want to buy a company that was in the quagmire at the time. I think: the ship is sinking, and we are Noah’s Ark. They want to survive, they have to change ours. New ship.”
What Mitchell wants is to buy the only assets in the bankruptcy process, and thereby be able to accurately determine what the many long-awaited and angry creditors can get. His goal is to save the company.
The bankruptcy process ensures that creditors are paid fairly. When most creditor issues are resolved, the company will be able to get out of the quagmire and leave a clean balance sheet.
The court hearing the bankruptcy case also issued settlement money to the victims of Harvey’s crimes. The money came from the sale of the company’s assets plus payments made by the company’s insurance company.
As Mitchell predicted, although Colony Capital’s Tom Barack expressed interest early on, investor Ron Burkel announced a deal in early March 2018, but a few days later He turned and left, and no buyer stood up to stop Weinstein Pictures from going to court.
In the bankruptcy proceedings, Mitchell, the buyer of the “fake horse bidding”, acquired all the assets of Weinstein Pictures for $350 million. Mitchell said: “It is this offer that saves them from liquidation. This means that the company will not die. Someone is willing to hire company employees.”
Of course, this process is open to all potential buyers, and about 40 bidders participated in the auction. Mitchell said: “Each of them only wants a part of it, not all of them. They want to pick the best part, and my advantage is that they want to buy it all.”
Backstory 2: You will never work in this town
Mitchell’s gambling attracted a lot of people’s ridicule.
“A lot of filmmakers told me:’Idiot, you will lose out. Hollywood will never work with you.’ My investor said to me:’I gave you hundreds of millions of dollars, but you have to buy a The Weinstein Company run by a sexual assailant?'”
According to Mitchell, there are two concerns that discourage investors.
The first point is that viewers will resist any entertainment content invested by Harvey Weinstein. “There are many people in Hollywood who think that American audiences will boycott these films. But from my own experience, I don’t think that will be the case.”
He said, “The moviegoers who live in Texas or Kansas have never heard of Harvey Weinstein, but they know about the films of Paddington and Tarantino. All of my five children I like those movies. People don’t follow the movie’s cast and crew like Hollywood.”
The second concern is that the studio that purchased the copyright of Weinstein’s film and television content would claim that Weinstein’s improper behavior constituted “significant adverse changes” and thus violated the contract. Questioners say that the so-called major adverse changes are likely to happen. If Netflix or Amazon terminate the contract, the studio will go bankrupt again.
Mitchell also doesn’t believe this statement. “What I know is that lawyers also say that a company can’t just leave because a producer has done a terrible thing.” He said, “There are no provisions that say if he/she does something terrible. , The contract no longer applies. Think of all the staff who worked hard for those movies. If that were the case, all efforts would be wasted because of what an executive producer did.”
In July 2018, the judge declared Lantern’s victory. Its 350 million US dollars including cash and obligated debt constituted the entire pool of funds to repay creditors. Creditors and shareholders provided Weinstein with more than US$1 billion.
The creditors with priority rights are banks that provide financing for the company. They occupy a very advantageous position because the cash flow of the movie itself falls directly into their hands to provide guarantees for their loans. If the bank can’t get the money, they will take the movie and sell it. These lenders received $165 million in cash.
Another US$50 million was used to pay legal fees, financial advisory fees and other administrative expenses. The court also paid tens of millions of dollars to production companies with strong claims because they and the Weinstein brothers jointly funded some movies that are still in the production stage.
In general, the fall of Weinstein Company cost equity investors 450 million U.S. dollars, and lenders also lost hundreds of millions of U.S. dollars.
A company owned by billionaire Ryan Blavatnik suffered a loss of $45 million because it was an unsecured creditor of Weinstein’s television business.
When Mitchell took over, the production company still had about 80 employees, about half of the total number of employees before the bankruptcy.
“I have to make sure that I can re-employ these people to a new company called Lantern Entertainment,” Mitchell said. “We held an all-hands meeting in our Wilshire Boulevard office. I said: ‘We are going to buy these assets. Please come and work for the new company. There will be a formal onboarding process next.'”
An employee raised his hand and asked, “Do you do criminal background checks and drug tests?”
Mitchell recalled: “I was surprised. I replied:’Yes, of course.’ The next day, to my surprise, 12 people resigned.”
Despite being expelled from management, Bob Weinstein still wanted to make a movie for this new company.
Mitchell said: “He said:’I know these talents well.’ There are also some people who want to work with Bob Weinstein, not everyone hates him. But I want this company to get rid of Weinstein’s Influence.”
Find the right team
By the beginning of 2020, Spyglass had obtained a generous return from the film library and paid off the debts brought by the acquisition of the company.
The year before, Mitchell attracted new investors, including Ben Amal’s Eagle Pictures, Warner Bros., Cineworld, and most importantly, Gary Barber, the former CEO of MGM. According to Mitchell, the new partner will buy shares at a price close to Mitchell’s original cost.
Barber hopes to enhance the strength of his Spyglass production company, which has produced independent films, with representative works such as “27 Dresses” and “Sixth Sense”.
In April 2019, Barber replaced Mitchell as the company’s CEO and Lantern changed its name to Spyglass Media Group.
One of the main reasons for the success of the production company was that Mitchell decided to outsource the sales of its film library to Lionsgate. The latter has a larger volume and can flexibly package and sell the works of Lantern and Spyglass with its own popular films, thereby increasing the licensing fees for both parties.
During the COVID-19 pandemic, as Americans spend a lot of time watching movies, the value of Spyglass film library has been greatly increased, especially in the context of the industry’s general lack of new film and television content.
Mitchell pointed out: “Everyone is trapped at home and has nothing to do except watch TV. For us, this is the right time and place.” With the foreshadowing of this cooperation, Lionsgate bought it. For most of the films in the Spyglass film library, this transaction will provide Spyglass with a strong development momentum.
Brian Cranston, Nicole Kidman and Kevin Hart in the film “Unreachable”. Image source: Courtesy of Lantern Entertainment
The production company is restarting production of movies.
It recently completed the filming of “Scream 5”, which assembled the original starring lineup, including Courteney Cox, David Arquette and Neve Campbell.
It retains “Unreachable” starring Kevin Hart, Nicole Kidman and Brian Cranston, which won $130 million in box office in 2019.
Mitchell said: “The company has lost distribution channels. That is Harvey and Bob’s expertise. Before STX was released, we peddled “Unreachable” to most major publishers.”
Spyglass is working on a new sequel to “Very Little Spy” and has also won the copyright to the old TV series “Knight Rider” about a talking car. It also plans to collaborate with Ben Amal’s Eagle Pictures to remake the old Italian film “Perfect Stranger”.
This restructuring expert has returned to Dallas, so how does he feel about his time in the film studio?
“A big-name broker said to me:’We like you guys who engage in private equity funds.'” Mitchell said. “‘You took a private jet to Hollywood, and then took a Greyhound bus to leave.’ This is what people in the industry think:’Who do you think you are? Dare to come here to tell us how we should run our own business? We don’t welcome you! ‘”
And Mitchell won praise because he saved an iconic brand—and because he proved that he can re-train talents and make bold choices instead of indulging in extravagance, which is crazy. The luxury of luxury has turned many Hollywood commercial stories into a very dark noir film. (Fortune Chinese Network)
Translators: Xu Liang, Wan Zhiwen