By Gary Symons
TLL Editor in Chief
The publisher Scholastic (NASDAQ: SCHL) has signed a definitive agreement for a major strategic investment in 9 Story Media Group.
The $186 million investment will see Scholastic acquire 100% of the economic interest in and a minority of voting rights in 9 Story, a successful Canadian animation studio.
Scholastic is a leading global publisher and media company working mainly in the area of children’s books and educational publications, such as textbooks.
Scholastic says the investment in 9 Story, a leading independent creator, producer and distributor of premium children’s content, will allow it to expand its brand and intellectual property into film and children’s series.
The investment also follows a long-time partnership between Scholastic Entertainment, the company’s successful and award-winning media development and production division, and 9 Story, which includes the animated series reboot of Clifford the Big Red Dog on PBS Kids and Amazon Prime Video, and production of Eva the Owlet on Apple TV+.
“This highly strategic combination, adding 9 Story’s industry-leading capabilities with Scholastic’s trusted brand and proven ability to create iconic children’s series and franchises, has tremendous potential to build deeper connections with young people through our stories, as the pages of our books come to life on screens and through merchandising,” said Scholastic president and CEO Peter Warwick “At its core, Scholastic’s 360-degree content creation strategy is about engaging children with reading, and we have introduced our stories to generations of kids by reaching them where they are.
“We are thrilled to build upon our more than 20-year relationship with 9 Story’s exceptional management team and employees, whose culture and values could not be better aligned with our own.”
Iole Lucchese, Scholastic Board Chair and President, Scholastic Entertainment, says the deal will combine the strengths of the two companies in a way that both expands their capacity for new media production, but also to expand Scholastic’s existing brands, authors and children’s illustrators.
“By bringing together Scholastic’s knowledge of what kids love and our proven track record of successful media development with 9 Story’s top-rated global production, distribution and licensing capabilities, I am confident we can meet the continued, strong demand for high-quality kids and family entertainment,” Lucchese said. “Today’s announcement presents a huge opportunity to expand the footprint of Scholastic’s authors and illustrators and to build global franchises on every platform, creating more value for the creators and for our shareholders.”
9 Story’s business divisions include Brown Bag Films, the award-winning animation studio, which has won 21 Emmy Awards and two Oscar nominations; 9 Story Distribution International, the global distribution division, which represents more than 5,000 half-hour episodes of 2-D and 3-D animated and live action programming for kids, including Clifford the Big Red Dog and A Kind of Spark; and 9 Story Brands, the consumer products division, which builds global kids’ brands both on- and off-screen, including Daniel Tiger’s Neighborhood, Karma’s World and Super Why.
9 Story has also shown some strong growth over the past year, recently announcing a significant deal with Crayola Studios to handle production and distribution on all new, original projects, as well as the acquisition of Portfolio Entertainment’s library, production slate, and development projects, which added more than 550 half-hours of content.
“We’ve been fortunate to work with Scholastic for decades, going back to my own start with the family-favorite production, ‘The Magic School Bus’,” said 9 Story president and CEO Vince Commisso. “The combination of our global studios, sales and distribution capabilities with Scholastic’s existing media business, iconic name and unique capabilities opens even more opportunities to deliver compelling stories and build impactful brands for audiences worldwide.
“We’re eager to begin bringing together our complementary talents to enhance Scholastic’s position as a top developer, producer and distributor of kids and family content.”
Scholastic Entertainment was rebooted under Lucchese’s leadership in 2017, recognizing the untapped potential of Scholastic’s engaging children’s content, which precipitated the company’s move into film and series production. Since then, the development and production division has rapidly become an award-winning and highly profitable business, most recently announcing production of a second season of the live-action Goosebumps series for Disney+ and Hulu.
Under the terms of its definitive agreement with 9 Story, Scholastic will acquire 100% of the economic interests and a minority of voting rights in 9 Story for approximately USD $186 million, subject to customary purchase price adjustments.
The investment has been approved by both companies’ boards of directors and the shareholders of 9 Story. Subject to receipt of a satisfactory opinion by the Minister of Canadian Heritage and other customary closing conditions, the transaction is expected to close in Scholastic’s fiscal 2025 first quarter, which begins on June 1, 2024. Scholastic intends to initially fund the transaction from its available cash and its revolving credit facility and anticipates maintaining its regular dividend and its authorized stock repurchase program.
9 Story recorded revenue of approximately USD $104 million in its most recent fiscal year, ended Aug. 31, 2023. Scholastic expects the addition of 9 Story to contribute long-term earnings accretion, reduce the capital intensity of production and drive substantial improvements in top-line growth and bottom-line results through 9 Story’s existing content library, best-in-class production studios, and global distribution and licensing capabilities.
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