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Entertainment

Behind the scenes of CJ's $775 mn Endeavor Content purchase

The producer of the film "Parasite" takes a step closer to the goal of taking root in Hollywood

By Nov 24, 2021 (Gmt+09:00)

CJ Group Chairman Lee Jay-hyun (right)
CJ Group Chairman Lee Jay-hyun (right)

CJ ENM Co., the producer of the Oscar-winning "Parasite", was the only South Korean company among a few entertainment powerhouses and investment firms invited to bid for the Hollywood studio Endeavor Content around July of this year.

But the CJ Group unit had already been well-prepared for the cross-border deal. Late last year, it set up a task force team of about 10 members for the transaction under the project name "Eagle," soon after it was tipped off about a possible sale of the producer of La La Land, another Academy Award winner.

After the year-long preparation and all-out efforts, CJ ENM this month clinched the $775 million acquisition of an 80% stake in the Endeavor Content unit from Endeavor Group Holdings. It competed with the US-based Apollo Global Management Inc. and a couple of other global production companies until the last minute for its largest-ever acquisition.

Ahead of the deal, CJ ENM's drama production unit Bon Factory Co. sealed a partnership with Endeavor Content in January of this year to jointly produce and make movies and dramas for global audiences, based on both companies' original content and intellectual property.

When Bon Factory was in talks with Endeavor for the partnership last year, it was informed of the Hollywood Studio's possible divestment of the content unit. Bon Factory was acquired by CJ ENM early last year.
Behind the scenes of CJ's 5 mn Endeavor Content purchase

Endeavor Content was put on the market after its parent Endeavor Group in February came to terms with Writers Guild of America West (WGA). Under the settlement, it needed to sell an 80% stake in the content entity, addressing the guild's concerns over talent agencies' rapid expansion into content production and distribution businesses.

Endeavor Group owns the talent agency William Morris Endeavor (WME), which represents numerous Hollywood stars such as Ben Affleck, Jessica Alba, Christian Bale, Matt Damon and Whoopi Goldberg.

The settlement followed the guild's newly-established rules to cap entertainment agencies' ownership of production or distribution entities to 20%, with an aim to avoid their conflicts of interest.

DIFFERENT APPROACH

In the face of intense competition and little progress in negotiations, CJ ENM changed its approach to differentiate itself from other bidders. Rather than bidding up, CJ turned its focus into a growth strategy for Endeavor Content, given that the parent group will retain a 20% stake after the divestment.

The South Korean food-to-entertainment group's arm concluded that suggestions for synergy creation between CJ Group and Endeavor Content would appeal to the shareholders of Endeavor Group Holdings, which went public on the New York Stock Exchange last February.

After four months of email exchanges and Zoom meetings, CJ ENM's task force team, led by its entertainment division head Song Chang-bin, packed up and flew to Los Angeles at the end of last month. To convince Endeavor Group's management of its dedication to the deal, CJ asked for a one-on-one meeting almost every day since its arrival in California.

CJ Group Vice Chairman Miky Lee, a granddaughter of Samsung Group founder Lee Byung-chull, acted as a go-between, using her relationship with Endeavor Group CEO Ari Emanuel.

Song, a former investment banker of JPMorgan. has built his career as an M&A specialist in the entertainment sector. JPMorgan and O'Melveny & Myers LLP., a US law firm, advised CJ ENM on the transaction.

Miky Lee (center) speaks after \
Miky Lee (center) speaks after "Parasite" wins the Oscar for the best motion picture of the year in 2020

TAKING ROOT IN HOLLYWOOD

With majority ownership of the Hollywood studio, CJ ENM will be now able to take an even bigger slice of profits from its original content co-produced and distributed with foreign studios. Until now Korean content producers had to give up most of their sales rights to global production or distribution companies and instead, received some fees as an original content creator.

Further, the latest transaction would perfect CJ Group's content business from production to distribution. CJ ENM owns and manages intellectual property rights, while Endeavor Content and CJ's domestic studio Studio Dragon will take charge of production activities. They can use CJ's over-the-top service TVing as a streaming platform.

In May of this year, CJ ENM's domestic rival JTBC Studios acquired an 80% stake in Wiip, the content unit of Creative Artists Agency (CAA) for an undisclosed sum. CAA is one of the top three talent agencies in the US, alongside Endeavor Group.

Write to Jun-ho Cha at chacha@hankyung.com

Yeonhee Kim edited this article.

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