Genius Brands International says it has completed the acquisition of WOW Unlimited Media in a deal the company says will create “a global animation and digital media powerhouse.”
The two companies announced Oct. 27 that they have entered into a definitive agreement whereby Genius Brands will acquire WOW! for approximately US$53 million in cash and stock.
WOW! Unlimited Media is a Canadian animation studio with global reach, with offices in Toronto, Vancouver, New York and Los Angeles. It has built one of the world’s leading animation production companies, having produced top shows for broadcasters, streamers and IP holders like Netflix, Amazon Prime, Sony, Hulu, Dreamworks, Moonbug, Peacock and Mattel.
That creative success has allowed WOW! to post some impressive numbers. Based on the last 12 months from July 2020-June 2021, the company’s revenue and EBITDA were $56.4 million and $5.1 million respectively, and its growing order book has over $62 million dollars of contracted production in the next year alone.
“The acquisition of WOW! substantially accelerates the financial growth of Genius Brands, delivering on our promise to shareholders to execute meaningful and accretive acquisitions, as we seek to rapidly consolidate the marketplace and become the foremost producer, broadcaster, and consumer product licensor of high-quality children’s entertainment in the world,” said Andy Heyward, Chairman and Chief Executive Officer of Genius Brands.
Hayward says the acquisition is not just about revenues, but rather brings together two like-minded teams with a common goal, and with a great deal of mutual respect.
“I have known and worked with WOW! Chairman and CEO Michael Hirsh throughout my career, and there is nobody more talented, accomplished or well regarded,” Heyward said. “His track record of many hits includes the first Star Wars animated programs, Magic School Bus, Care Bears, Babar, Johnny Test, and Beetlejuice, among others.
“In addition to the animation productions of WOW! today and the exciting new brand brought to the table for Genius Brands, WOW! has a massive social media footprint across YouTube, TikTok, Giphy, etc., expanding the Genius Brands kids’ audience demo into the lucrative teens and young adult marketplaces,” he added. “The company has over 1 billion views per month on its Frederator YouTube Network, with over 2,500 advertiser supported channels, making it the number one talent driven animation YouTube Network.”
WOW!’s presence in both the US and Canada is also a factor, Hayward explains. “WOW!’s Canadian production facilities enable a number of profitable synergies for the company via access to various federal and provincial tax credits, which will allow Genius Brands to transfer its current animation production at great savings from China,” Heyward added. “In addition to WOW!’s third party service production, we will now place many of the exciting upcoming WOW!-owned content on Kartoon Channel! and activate it through our consumer products and global distribution sales network, further advancing revenues and earnings.”
The merger is also being seen as a huge step forward for WOW!, as Genius Brands has a built in distribution network that creates powerful synergies between the two teams.
“This is a powerful partnership that brings immediate and significant value for shareholders,” said Michael Hirsh, Chairman and Chief Executive Officer of WOW!. “We bring production capacity, new IP, and a robust and profitable YouTube Network with over a billion views per month. Genius Brands, with Kartoon Channel!, has a fully distributed footprint where our content can thrive and also help Kartoon Channel! itself expand. Genius Brands’ world class consumer product licensing team led by Kerry Phelan, will enable us to monetize all of these great characters and brands.
“This transaction represents the culmination of our extensive strategic review process. We feel that this is a very attractive opportunity for our shareholders with significant potential upside in the months and years ahead.”
The deal also includes some compelling financial benefits for Genius and WOW! shareholders. According to Genius, the acquisition increases Genius pro-forma revenues for the last-twelve-months (LTM) by over 1100%. WOW! alone earned $56 million in revenue and EBITDA of $5 million, and its EBITDA growth was an impressive 45% Year On Year. In short, the deal effectively doubles the revenue of the combined company, while adding $5 million to the bottom line.
Just as importantly, the acquisition delivers cost saving synergies that the two companies could not achieve on their own. For example, WOW! in- house brands, currently unexploited, can now be monetized through Genius Brands’ Ad Sales, Global Distribution, and Consumer Product licensing units. There will also be significant administrative savings from the upcoming delisting of the Canadian publicly listed WOW! entity, and the related regulatory, legal and operational expenses.
However, the real goal of the merger, according to Genius and WOW!, is the create an “end-to-end animation ecosystem” that will drive more value for shareholders, including:
- Addition of two studios with strong track record of producing top end animation – Frederator Studios (produced Adventure Time, FairlyOdd Parents, Powerpuff Girls, Dexter’s Laboratory, Castlevania) and Mainframe Studios (produced Madagascar – a Little Wild, Barbie Dreamhouse)
- A captive animation production studio that can be leveraged for in-house production of Genius Brands’ properties, thus driving cost synergies
- Expanding audience demographics beyond kids into teens and young adult audiences and global social media platforms, with high-performing properties such as:
- Castlevania (Top 10 on Netflix)
- Bee and Puppycat (over 1 billion impressions across YouTube and social media)
- Catbug (over 200 million impressions on TikTok)
As in any merger, this deal will result in many changes at the management level, the most important of which will see Hirsh joining the Board of Directors at Genius Brands, while continuing his responsibilities for Mainframe, Frederator Studios, Networks and Platforms.
Genius also assured Canadian fans and WOW! employees that the acquisition does not mean WOW! will be leaving Canada, and in fact, the companies presence in Canada is considered a major benefit. WOW!’s Canadian operations are slated to continue under the new combined company, and WOW! will operate as a distinct, Canadian-controlled business.
In fact, WOW! will likely see increased activity north of the border, as Genius will be able to take advantage of Canada’s content incentives, such as the Production Service Tax Credits and various funding opportunities under the Canada Media Fund (CMF).