GTCR To Make 2x Their Money On Classic Media

GTCR is exiting Classic Media after less than three years.

Last week DreamWorks Animation announced it was buying Classic Media for $155 million cash. The seller is Boomerang Media Holdings, a portfolio company owned by GTCR.

The transaction is expected to close in a few weeks, said David Donnini, a GTCR principal.

New York-based Classic Media owns more than 450 family entertainment titles including Lassie, the Lone Ranger and “Casper the Friendly Ghost.” The company also owns one of the world’s largest comic book archives, which includes Golden Books. Classic Media employs about 80 people. It posted net revenue of $82.2 million on operating profit of $19.2 million for the 12-months ended Feb. 29.

Eric Ellenbogen and John Engelman founded Classic Media in 2000 and sold it to Entertainment Rights nearly seven years later for a reported $210 million. In January 2008, Ellenbogen and Engelman partnered with GTCR to form Boomerang Media. GTCR agreed to commit up to $200 million equity as part of the deal. The investment came from GTCR’s Fund IX, which raised $2.75 billion in 2006.

Entertainment Rights encountered hard times during the financial crisis of 2008. Boomerang, led by co-CEOS Ellenbogen and Engelman, acquired Entertainment Rights, including Classic Media, from its lender, Lloyds, for about $90 million in April 2009, a source said.

But that was pretty much it for Boomerang in terms of acquisitions. GTCR, when it formed the company in 2008, wanted to build the business, Donnini said. There were “a whole bunch of properties” that the Chicago buyout firm wanted to buy. But GTCR got outbid on several occasions and, one by one, the properties they wanted were sold to strategics at “big prices,” Donnini said. He pointed to Mattel’s buy of Hit Entertainment, which owns Thomas & Friends, Bob the Builder and Angelina Ballerina brands, for $680 million earlier this year. “We got a little bit frustrated trying to buy things,” he said.

Boomerang completed only one other deal outside of Entertainment Rights. Earlier this year, Boomerang acquired children brands Olivia, the girl pig, and Noddy, the wooden boy, from financially troubled Chorion.

All of the properties that GTCR had been focused on four years ago ended up being bought by someone else, usually a strategic, Donnini said. “We realized we were more of a seller than a buyer earlier this year,” he said.

GTCR put Classic Media up for sale a few months ago, he said. While a handful of buyout firms were interested, the real interest came from, of course, strategics, Donnini said. He declined to name who else was interested.

The sale of Classic Media represents the end of GTCR’s holding in Boomerang. Ellenbogen and Engelman are joining DreamWorks, he said. “We didn’t have the opportunity to invest the whole $200 million…This will wrap up the investment from our perspective,” Donnini said.

The bright spot? With the sale of Classic Media, GTCR is expected to make a little more than 2x its money, a source said.

JP Morgan advised DreamWorks. Craig Minear and Roy Furman of Jefferies provided financial advice to Classic Media.