Via Financial Times

The executive behind a €2bn bet to create the biggest independent television producer outside America has insisted the debt-heavy takeover makes “even more sense” after coronavirus, giving it the scale to compete with the biggest studios in the streaming era.

Marco Bassetti, chief executive of French entertainment group Banijay, said the deal with Endemol Shine will create a “resilient and totally independent” producer that generated €2.7bn of combined revenues last year from 200 separate units worldwide.

Banijay’s acquisition of the larger Anglo-Dutch producer, a deal agreed last autumn that closed on Friday after a drawn-out sale process, will bring together a library with 88,000 hours of shows including Big Brother, Black Mirror, The Kardashians and Peaky Blinders.

Even before the pandemic struck, Banijay’s financial stretch to become the only European producer approaching the size of US rivals was laden with risk. The Paris-headquartered group raised €2.4bn of debt just weeks before the crisis shuttered production in many countries, borrowing that has since weighed on its credit rating. The loans were used to fund most of the acquisition, as well as to refinance €440m of existing Banijay debt.

Mr Bassetti denied any regrets on the price fixed last year, telling the Financial Times the combined group would have the clout and diversity to exploit opportunities in the crisis.

“To be honest with you, after Covid it made even more sense to do this because we have more opportunities in the market — today scale is even more important,” he said.

The former Endemol executive played down media reports that Banijay, which is effectively controlled by Stéphane Courbit’s Lov Group and part-owned by Vivendi and Italian group De Agostini, tried and failed to renegotiate the price in the wake of the pandemic.

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“There were some details but these were the usual details before closing,” he said, referring to talks with Endemol’s former owners Walt Disney and private equity group Apollo Global Management.

Like many film and television producers since the shutdown, Banijay and Endemol have had to cut costs and move hundreds of staff off the payroll. Big buyers of their content, such as broadcasters, are also feeling the strain from the slump in advertising.

Both Moody’s and S&P Global Ratings have downgraded Banijay since the crisis, pointing to the revenue hit from the shutdown. S&P estimates adjusted debt will increase to more than nine times the expected operating profit for the combined group in 2020.

“Our main goal, financially speaking, is to deleverage the company,” said Mr Bassetti. “We believe that having this diversity, this strong geographic footprint, can be worth a lot even in the face of a crisis like this.”

He added that low fixed costs, geographic spread and strong franchises have helped absorb the shock. While he declined to give precise figures, he said the financial hit to the combined group’s revenues was below the 25 per cent suffered by some broadcasters.

“The stronger and more well known your IP, the less you are impacted by this,” he said. “Having said that, we have a huge pressure on margin, because at least for 2020, we can see our clients have to face a difficult financial situation.”

Banijay’s main business remains selling unscripted and reality shows to traditional broadcasters. The merger will modestly increase Banijay’s drama output, but Mr Bassetti expects streaming services to be more interested in unscripted shows following the success of Netflix’s Tiger King and The Last Dance.

“They are not our shows but they have a huge audience and they are not so expensive,” he said. “Our view is that the balance between scripted and unscripted on linear television will end up being not so different from what we will see on streaming platforms,” he said.

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Interest in the genre is both an opportunity and a threat for Banijay. With streamers such as Netflix insisting on full ownership of a show’s rights, one big challenge for Banijay’s business will be retaining the ability to export formats to other markets ⁠ — the model that made franchises such as Big Brother or Survivor so lucrative.

Mr Bassetti thinks local streaming services ⁠ — the Viaplay in Scandinavia or Movistar in Spain ⁠ — will allow the rights model to survive and help Banijay attract more entrepreneurial talent. “This is the history of audiovisual production and I think will remain the same with streamers,” he said.