What lies ahead for HELLO SUNSHINE after their $900 Million sale

THE BASICS: Reese Witherspoon’s HELLO SUNSHINE production company sold with a valuation of $900 Million dollars to a new unnamed company run by 2 former top DISNEY execs (ex COO Tom Skaggs and ex Head of DISNEY+ Kevin Mayer).

The company is financed by private equity firm BLACKSTONE, who is dedicating $2 Billion to the company according to the WSJ.

BLACKSTONE is run by Steven Schwarzman, a business advisor to Donald Trump during his administration, who also donated over $4 Million dollars to his inauguration and re-election efforts.

TOM & KEVIN: Since Kevin left his brief tenure as CEO of TIKTOK US in 2019, the two former colleagues have been heavily involved in the SPAC space in the past 2 years (SPAC - essentially a publicly traded company created with a set amount of investment $$ backing, with the explicit intent to find an existing company to buy take public).

They created one that bought the BEACHBODY fitness app this Winter, and have had some activity in the NFT space too, but this is their first foray back into more “traditional/Hollywood” media. Kevin also became the chairman of sports subscription streaming service DAZN this Spring so… lot goin on these days. DAZN seems to be totally separate from this venture for the record.

WHAT’S AHEAD: The idea for this new HELLO SUNSHINE / BLACKSTONE company is to acquire more TBD entertainment companies with BLACKSTONE’s cash (reported to be $2 Billion) to build a “conglomerate of creators” if you will. Will Smith & Jada Pinkett Smith’s WESTBROOK ENTERTAINMENT is one of the names on their radar according to The WSJ who broke the story.

THE…. WHY? Outside of buying the “Reese brand” and some SUNSHINE digital business lines (Reese’s popular Book Club, podcasts etc), it’s not clear what BLACKSTONE is actually getting for their $900 Million, outside of a group of people who know how to create great entertainment which… is definitely not worth $900 Million.

While HELLO SUNSHINE was profitable in 2020, and has been a producer on many huge projects (“The Morning Show”, “Big Little Lies” etc), they don’t actually have ownership stakes almost any of them, so there’s no real library coming with that $900 Million valuation.

It looks like this new BLACKSTONE-backed company is figuring they can build a hive of high output producers (expect the names IMAGINE, A24 and others to be bandied about as well) to build some sort of super-company with scale and buzz, and perhaps the company begins to finance the productions of the companies, and then license the movies & limited series they produce, thus giving the company more value (ie a library). The recent $450 Million NETFLIX deal for the 2 new “Knives Out” movies comes to mind as an inspiration.

And then… long term, perhaps they sell to an APPLE or AMAZON down the road - i.e. everyone’s new long term business plan. Building and selling is what Private Equity does after all.

But it’s certainly not a guaranteed or proven path they’re going down, and if (when?) the hype valuation for companies ($8.4 Billion MGM sale, NETFLIX’s $300 Million showrunner deals, VIACOM paying $160 Million to Alex Kurtzman this week, etc) crashes or comes down from the ether when people start realizing the returns aren’t there, AT&T may be very happy to have the check it got this week.