Manoj Bhargava, founder and owner of 5-Hour Energy and multiple businesses mostly based in Farmington Hills, has signed a binding letter of intent to acquire 65 percent ownership of Arena Group Holdings Inc. in New York, a publisher of multiple properties including Sports Illustrated, TheStreet, Parade Media, Men’s Journal, and HubPages.
Arena Group is a technology platform and media company that is home to more than 265 brands. Under the deal, Bhargava will invest $50 million in Arena Group.
As part of transaction, Bridge Media Networks in Oak Park, which is owned by Bhargava, will become part of Arena Group. In addition to WHNE-TV3, Bridge Media Networks is a privately held media group with two national television networks distributed across more than 100 owned and affiliated over-the-air stations, 35 OTT (over the internet), CTV (connected TV) agreements, and multiple multichannel video programming distributor (MVPD) and cable agreements,
The goal of the enhanced Arena Group is to create a well-capitalized, growing media company with digital, commerce, print, and video capabilities all supported by a unified technology platform.
“This combination of broadcast, digital, and brands will be ‘one plus one is eleven’ – not two or even three. And we’re just getting started,” says Bhargava, founder and CEO of Innovations Ventures (dba Living Essentials), the company known for producing the 5-hour Energy drink. Simplify Inventions, IV Media, and Bridge Media Networks are all founded and led by Bhargava.
A global businessman and philanthropist, Bhargava is dedicating most of his wealth to help the poorest third of the world. He also owns or is a major investor in other companies, including HANS Premium Water, Diagnostic Green, Stage2 Innovations, and Bleecker Street Entertainment.
Highlights of the proposed combination include:
— The existing assets of The Arena Group will be combined with the video programming, distribution, and production assets of Bridge Media Networks, including its two 24-hour networks, NEWSnet and Sports News Highlights, as well as the automotive and travel properties Driven and TravelHost, further expanding The Arena Group’s vertical business ecosystems.
— As part of the transaction, The Arena Group will receive a $50 million cash investment and a five-year guaranteed advertising commitment of approximately $60 million from a group of consumer brands also owned by Simplify, including 5-hour Energy, and the Bridge Media Networks operations.
— As consideration, Simplify will receive $25 million of preferred stock at a 10 percent non-cash payment-in-kind (“PIK”) coupon with a term of five years from the closing date, and common equity which will represent approximately 65 percent ownership of the combined company on a fully diluted basis based on $5 per share.
“This strategic combination dramatically accelerates our planned expansion across the video ecosystem,” says Ross Levinsohn, CEEO and chairman of The Arena Group. “Our immediate opportunity to create, distribute, and monetize premium video content across all linear, digital, and connected ecosystems provides a lucrative opportunity for The Arena Group.
“The production capabilities and opportunities with advertisers will further diversify our offerings. By combining two established networks with significant linear and digital distribution, The Arena Group will have a significant presence in OTT, CTV, and Free Ad Support Television channels, (which are) some of the fastest-growing segments of the video market.”
The production resources of Bridge Media Networks will provide a “dramatic boost” to Arena’s video capabilities, which the company believes will unlock “significant revenue opportunities” for the combined company.
“Simultaneously, this proposed transaction will extend the maturity of our debt by three years at a very favorable rate, providing us optionality and a more stable foundation from which to operate,” adds Levinsohn. “Combined, we expect to have a diversified, multi-platform, well-capitalized organization, with greater scale, expanded margins, and an accelerated path to profitability.”
The Arena Group says it intends to use a portion of the cash to reduce its debt by $20 million from current levels.
Bryant Riley, CEO and chairman of B. Riley Financial, currently the largest equity and debt holder of The Arena Group, adds, “We believe this is a transformational transaction for The Arena Group, combining an experienced management team with a history of making accretive acquisitions with a well-financed partner who shares the vision that the media space is ripe for investment and opportunity.”
In 2022, The Arena Group doubled its verticals through organic and inorganic growth, including acquiring Parade, Men’s Journal, Fexy Studios, and the Adventure Network, and grew annual revenue growth from $53.3 million in 2019 to $220.9 million in 2022. Despite a challenging advertising market, The Arena Group delivered improved second quarter financial results across key operating metrics, including top-line revenue growth.
As part of the transaction, B. Riley Financial has agreed to extend the maturity of the remaining debt held by it from Dec. 31, 2023 to Dec. 31, 2026 at a fixed rate of 10 percent.
The transaction is expected to close in the fourth quarter of 2023, subject to negotiation of definitive agreements, the completion of due diligence, the approval of The Arena Group’s shareholders, the receipt of any required regulatory approvals, and certain other closing conditions.
The companies anticipate integration of the respective businesses will be completed in early 2024.
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