Versant Is on a Quiet Buying Spree

When it comes to M&A, few have been busier than Versant.

It got its start as a collection of cable networks jettisoned from Comcast at the start of the year, but it’s moved quickly to introduce itself to investors by quietly acquiring businesses that are decidedly not cable related.

Versant is hardly the only one busy in the M&A arena. Companies are potentially eyeing Lionsgate, the FCC is taking steps to lift ownership caps on broadcasters and we have the latest developments in the Paramount-Warner Bros. Discovery saga. We also have VC investing data from PitchDeck, which saw investors place wagers on microdramas and more AI startups in June.

Thanks for reading.

THE DEEP DIVE

Versant’s Dave Pietrycha (Photo courtesy of Versant)

Versant On a Buying Spree With Cable Cash

Versant Media Group, the cable network company that was spun off from Comcast in January, has been on an M&A binge, buying or selling five companies in the past few months.

While cord-cutting has reduced the value of cable networks by shrinking their advertising and distribution revenue, David Pietrycha, Versant’s chief revenue and business officer, told The Ledger that the company likes the networks and that their cash flow helps fund the acquisitions that will make it grow.

Versant is primarily looking to acquire companies that fit with its four main business verticals.
The company has been able to fund acquisitions with cash on hand or generated by operations. But it is willing to make a transformative deal that would require a bigger check.
Buying more cable networks is not on Versant’s radar right now. But a network in the food category could be tasty.

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Here’s a rundown of the deals:

In December, Versant acquired INDY Cinema, a cinema operating system now called Fandango1.
In January, it acquired Free TV Networks, which operates free ad-supported streaming networks.
In April, it bought StockStory, an AI stock picker.
In May, it also sold Sports Engine, a tech company specializing in youth sports.
Last week, it announced its biggest deal, the $530 million purchase of Full Swing, which makes sophisticated golf simulators.

What’s next? Pietrycha said Versant isn’t close to anything right now.

“We want to do deals that generate strong shareholder returns, and we can’t guarantee that those are always going to be sitting there ready for us,” he said.

Versant execs mark the company’s listing on NASDAQ (Photo courtesy of Versant)

Versant’s goal is to reduce its dependence on pay TV revenues and grow non-pay-TV revenues to 30% in the short term and 50% in the long term.

Buying more businesses is the quickest way to get that done. “We will have to do more M&A to be successful in moving toward that goal,” he said.

Versant focuses on four key verticals: business news and personal finance, built around CNBC; political news opinion, radiating from MS NOW (formerly MSNBC); golf with the Golf Channel; and sports and genre entertainment with USA Network, Syfy and other cable networks. As part of its spinoff from Comcast, Versant also started off with several digital businesses, including GolfPass and GolfNow and movie-related operations Fandango and Rotten Tomatoes.

Through acquisition and organic product growth, Peitrycha said the goal is to “create more depth in the verticals, get more of our fans’ time and a bigger share of their wallets.”

The best example of what Versant is trying to accomplish is in its golf business, where more than 50% of its revenue comes from operations other than the Golf Channel, Pietrycha said.

The Full Swing business fits with that goal. It’s not a media business, but it will benefit from the company’s relationships with golf courses and promotion on the Golf Channel.

Analyst David Joyce of Seaport Research Partners likes Versant’s plan to evolve enough to give it a “Buy” rating with a $46 price target.

“They are leveraging declining Linear Network cash flows in focused genres into an Experiential genre engagement expansion strategy, with the Full Swing acquisition adding to their linear Golf Channel, leading golf tournament media rights, GolfPass instructional subscription & play benefits platform, and GolfNow transactional service,” Joyce said in a research note.

Joyce estimates Full Swing gives Versant $144 million in revenue and $35 million in earnings before interest, taxes, depreciation and amortization in 2027. After that, he expects Full Swing to grow at a 4% clip annually.

Pietrycha said the Full Swing deal is big enough to move the needle for Versant. “We want to make sure that we’re not spending a lot of time and energy and capital on something that, in success, doesn’t really move our metrics,” he said.

Versant is looking at companies that would fit with its verticals, and it knows most of those businesses and the people that run them.

Pietrycha opened the door to bigger deals in the future, perhaps one that vaults the company into a new vertical.

“There will be a point that something might come along that’s more transformative and requires a bigger check,” he said.

Appetite for Cable

When the spinoff was announced, some analysts thought Versant might want to buy more cable networks, boosting its scale with advertisers and distributors. Joyce, however, said buying cable networks would make it harder for Versant to achieve its goal of having 30% of its revenue from non-pay-TV sources.

“I wouldn’t rule out anything. It’s not what we’re focused on right now,” Pietrycha said. But he noted that the company might want to get into the food category. “There are networks that focus on that. Now they’re not for sale right now, and we’re not evaluating them, but that could be interesting.”

DEAL SHEET

FCC Chairman Brendan Carr’s announcement that the commission will vote to remove the cap on TV station ownership next month sent broadcast stocks higher on Wednesday. Without the caps, some large station owners might be in play as takeover targets. E.W. Scripps stock jumped 10% to $3.09 a share Wednesday. The company recently resisted a takeover offer from Sinclair. Sinclair shares rose 4% to $14.36. Gray Media’s shares were up 6.6% to $4.06. Nexstar, which is in a legal battle with the states over its acquisition of Tegna, rose 4.4% to $183.20. The stocks held onto most of those gains Thursday, with Scripps up another 1.3% to close at $3.13 and Nexstar up 1.2%, closing at $185.26. Gray was off 2 cents at $4.04 as was Sinclair, which closed at $27.29.
A group led by the Khosla family agreed to buy the NFL Champion Seattle Seahawks from the Paul Allen Estate for $9.61 billion, a record price for a franchise. The family is involved with companies including Sun Microsystems and Curai. Neeru Khosla, an educator and entrepreneur, would become the first minority woman to have control of an NFL team. The Khoslas will have to sell their minority interest in the San Francisco 49ers, per league rules.
James Murdoch invested about $120 million in SpaceX, Elon Musk’s rocket company, before it went public. After the biggest IPO in finance history, Murdoch’s holdings blew up to be worth $7.5 billion, according to Fortune. Shares of SpaceX, however, are now below their IPO price.
Letterboxd is in sale talks with companies including Sony Pictures Entertainment, Netflix, Paramount, RedBird, TPG, plus Reddit co-creator Alexis Ohanian. Canadian holding company Tiny controls a 60% stake in the company, with founders Matthew Buchanan and Karl von Randow owning the rest. Here’s TheWrap’s breakdown of why it’s become such a hot acquisition target.

WRAP 20 INDEX

Here’s how the companies in our Wrap 20 Index performed this week.

FUNDING FILE

Venture capital activity in the media category in June dropped to $12.8 million from $205.5 million in May, according to data from PitchBook. There were 14 deals in June, down from 30 in May.

A year ago in June, there were 14 deals worth $43.1 million.

The biggest deal saw Idilio.TV, a microdrama streaming platform, raise $5 million in pre-seed financing from investors including Accelerator Ventures, Andreessen Horowitz, Endurance Capital, MBA Venture and others. Notably, one of the other investors is WndrCo, co-founded by Jeffrey Katzenberg, who famously got into short form content too early with his ill-fated Quibi startup.

VC activity in the U.S. entertainment software, publishing and media and information category rose to $1 billion in June thanks largely to two big AI bets. That figure is up dramatically from $98.8 million in May, according to PitchBook. There were 51 deals done in June, compared to 35 in May.

A year ago, there were 49 deals worth $287.4 million.

In the biggest deal, Suna, a company that lets users create music and songs using AI, raised $400 million in a later stage VC raise that valued the company at $5.4 billion. Participants included Alkeon Capital Management, BOND Capital, Menlo Ventures, Schroders Capital, Union Square Ventures and others.

Another large deal saw AlphaSense, which makes software that helps users search and analyze financial documents and data, raise $350 million in venture growth funding that valued the company at $7.5 billion. You guessed it: It’s also an AI venture. Investors included Accenture Ventures (Manish Sharma), DE Shaw Ventures, Goldman Sachs Asset Management, Viking Global Investors and others.

FINANCIAL ROUNDUP

Lionsgate Buyout Talk

Lionsgate stock jumped after a Reuters report that the Bollore Group of France was interested in taking over the studio. The report noted that Banijay Group had also considered a bid.

On June 30, B. Riley Securities initiated coverage of Lionsgate, noting that the company was a potential takeover target, but gave it a Neutral rating with a target price of $17 a share. “Lionsgate has rallied 131% following the company’s separation from Starz and, more recently on takeout speculation.”

Lionsgate’s movie business recently had a hit with “Michael” and analyst Drew Crum said he expects its TV business to improve, but the company’s $1.9 billion in debt “is a near-term limiting factor.”

Lionsgate stock traded at $13.30 prior to the takeover report and peaked at $14.65 on Wednesday before falling back. The shares closed Thursday at $13.62.

The Paramount-WBD Saga (Continued)

The clock is ticking on Paramount’s $110 billion acquisition of Warner Bros. Discovery. A series of legal machinations aimed at stopping the deal make it unlikely the Ellisons will be able to close the deal by the July date they were hoping for or the September timeframe announced publicly. If the closing is pushed past Sept. 30, Paramount will have to pay WBD shareholders a 25 cent-per-share ticking fee for every quarter the deal until the deal is done.

Here’s the legal brief:

On Monday, attorneys general from 12 states filed a suit in the Northern California district court to halt the deal on antitrust grounds. The AGs also sought a temporary restraining order preventing the deal from closing while the suit is litigated. By itself the TRO would delay the deal by 14 days, although it could be extended as the states seek a longer term preliminary injunction.
An earlier consumer suit brought by Paramount+ subscribers was formally linked with the AGs lawsuit.
On Tuesday, the Writers Guild of America filed a suit in the Northern District of California. They say the deal would hurt them by reducing how many buyers there are for TV shows and movie projects.
On Wednesday, Paramount filed an opposition brief to the states’ TRO, calling it “one of the weakest” in modern history
Across the pond, Paramount has offered concessions to obtain approval from the European Union regulators reviewing the transaction, with a green light potentially coming next week.