Genius Brands Int'l (GNUS) Acquires WOW! Unlimited Media for $53M

October 27, 2021 10:17 AM EDT
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WOW! Unlimited Media announced today that it has entered into a definitive arrangement agreement (the "Arrangement Agreement") with Genius Brands International, Inc. (NASDAQ: GNUS) whereby Genius Brands will acquire all of the issued and outstanding shares WOW! (the "WOW! Shares") for approximately C$66 million (US$53 million) in cash and stock (the "Transaction").

Under the terms of the Arrangement Agreement, shareholders of WOW! (the "WOW! Shareholders") will receive in exchange for each WOW! Share, 0.271 of a common share of Genius Brands (each, a " Genius Share") and C$1.169 in cash (the "Consideration"). The Consideration implies a value of C$1.623 (US$1.313) per WOW! Share, representing a 34% premium based on the 10-day VWAP of WOW! Shares on the TSX Venture Exchange (the "TSXV") as of October 26, 2021 and a 178% premium based on the 10-day VWAP of the WOW! Shares on the TSXV as of April 29, 2021 (the last trading day prior to the commencement of a strategic alternative process by WOW!).

Michael Hirsh, Chairman and Chief Executive Officer of WOW!, commented, "I'm excited to work with Andy and the Genius Brands team. This is a powerful partnership that brings immediate and significant value for shareholders. We bring production capacity, new IP, and a robust and profitable YouTube Network with over a billion views per month. Genius Brands, with Kartoon Channel!, has a fully distributed footprint where our content can thrive and also help Kartoon Channel! itself expand. Genius Brands' world class consumer product licensing team led by Kerry Phelan, will enable us to monetize all of these great characters and brands. This transaction represents the culmination of our extensive strategic review process. We feel that this is a very attractive opportunity for our shareholders with significant potential upside in the months and years ahead."

Andy Heyward, Chairman and Chief Executive Officer of Genius Brands, commented, "The acquisition of WOW! substantially accelerates the financial growth of Genius Brands, delivering on our promise to shareholders to execute meaningful and accretive acquisitions, as we seek to rapidly consolidate the marketplace and become the foremost producer, broadcaster, and consumer product licensor of high-quality children's entertainment in the world."

Key Transaction Highlights

Immediate liquidity for Wow! shareholders at an attractive premium

The Consideration includes a significant cash component that allows WOW! Shareholders to realize immediate value at an attractive premium of 34% and 178% to WOW!'s 10-day VWAP as of October 26, 2021 (the last trading day prior to the execution of the Arrangement Agreement) and April 29, 2021 (the last trading day prior to the commencement of a strategic alternative process by WOW!), respectively. In addition, WOW! Shareholders will benefit from the higher trading liquidity and broader market interest in Genius Shares.

Wow! shareholders to participate in the combined strength and future growth of Genius Brands

The Transaction creates a global animation powerhouse with an end-to-end animation ecosystem driving exceptional value for shareholders, including:

  • Vertical integration benefits from Genius Brands' distribution, licensing and merchandising teams.
  • Inhouse production of Genius Brands shows at WOW!'s Mainframe Studios.
  • Synergies include cost-savings from delisting of the Canadian publicly listed WOW! entity and related regulatory, legal and operational expenses.
  • Select WOW! content to be distributed via Genius Brands' direct to consumer Kartoon Channel! across Canada and the United States.

Expanded leadership team

In connection with the closing of the Transaction, Michael Hirsh, CEO of WOW! is expected to join the Board of Directors of Genius Brands and continue his responsibilities for Mainframe, Frederator Studios, Networks and Platforms.

Strong commitment to Canada

  • WOW!'s Canadian content operations will continue as a distinct Canadian-controlled business.
  • The transfer of animation production to Canada is expected to provide direct benefits and opportunities for Canadian animators and other production personnel.

Transaction Details

The Transaction will be effected by way of a court-approved plan of arrangement pursuant to the Business Corporations Act (British Columbia). Under the terms of the Arrangement Agreement, Genius Brands will acquire each issued and outstanding WOW! Share in exchange for the Consideration. After giving effect to the Transaction, WOW! Shareholders will hold approximately 4% of the issued and outstanding pro forma Genius Shares (on a basic basis, after giving effect to the conversion of the WOW! Notes (as defined herein)).

In connection with the Transaction, the outstanding 9.5% convertible debentures (the "WOW! Notes") of WOW! will convert into WOW! Shares, and will participate on the same basis as the WOW! Shares in the Transaction.

WOW! stock options ("WOW! Options") will be replaced with an equivalent number of Genius options ("Genius Options") based on the exchange ratio used to derive the Consideration. Such Genius Options will otherwise be issued on the same terms as the existing WOW Options! (subject to an extension of the term of such options to ensure that the Genius Options have a term to expiry equal to the greater of (i) the existing term of the WOW! Options being exchanged, and (ii) three years from the closing date of the transaction). In certain prescribed instances, WOW! Options will be subject to accelerated vesting, and the holder will have the ability to elect to exercise any in the money WOW! Options on a cashless exercise basis.

Certain eligible Canadian WOW! Shareholders will have the option to elect to receive in lieu of Genius Shares an equivalent number of exchangeable shares (each, an "Exchangeable Share"). Each such Exchangeable Share can be exchanged for one Genius Share at the option of the holder, subject to certain customary mandatory exchange events and sunset provisions.

Additional details of the Transaction will be described in the management information circular (the "WOW! Circular") that will be mailed to WOW! Shareholders and the holders of WOW! Notes (the "WOW! Noteholders") in connection with a special meeting of WOW! Shareholders and WOW! Noteholders (the "WOW! Meeting") expected to be held in early Q1 2022.

The Transaction is subject to the approval of (i) at least two-thirds of the votes cast by the WOW! Shareholders voting as a single class; and (ii) a majority of the votes cast by the WOW! Noteholders at the WOW! Meeting, excluding, in each case, the votes cast by persons whose votes may not be included in determining minority approval of a "business combination" pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), as further discussed below.

In addition to the aforementioned approvals, completion of the Transaction is subject to (i) receipt of approval under the Investment Canada Act, (ii) completion of a pre-acquisition restructuring with respect to of WOW!'s Canadian operations to ensure that they will continue to satisfy Canadian control regulatory requirements, and (iii) certain other customary conditions, including the receipt of all necessary court and stock exchange approvals. Subject to the receipt of all required approvals, closing of the Transaction is expected to occur in Q1 2022.

MI 61-101 Considerations

The Transaction constitutes a "business combination" under MI 61-101, as certain directors and officers of WOW! are each expected to receive a "collateral benefit" (as such term is defined under MI 61-101) in connection with the Transaction (primarily derived from certain change of control and bonus payments triggered by the Transaction). In accordance with MI 61-101, such directors and officers will be considered "interested parties" for purposes of the disinterested shareholder vote requirement pursuant to MI 61-101 (and will be excluded from such vote). Such individuals in the aggregate own or exercise direction or control over approximately 10.17% of the issued and outstanding WOW! Shares (calculated on a non-diluted basis) and 13.74% of the aggregate amount of WOW! Notes issued and outstanding.

Recommendation of the WOW! Special Committee and Board

After receiving the recommendations of the WOW! Special Committee (the "WOW! Special Committee"), and the Fairness Opinion (as defined below), the disinterested members of the WOW! Board have unanimously determined that (i) the Transaction is in the best interests of WOW!; (ii) the Transaction be approved; and (iii) in accordance with and subject to the terms of the Arrangement Agreement, it recommend to the WOW! Shareholders that they vote in favour of the resolution to approve the Transaction at the WOW! Meeting.

The WOW! Special Committee and WOW! Board obtained an oral fairness opinion from Cormark Securities Inc. (the "Fairness Opinion") to the effect that, as of the date of the Arrangement Agreement, and subject to the assumptions, limitations and qualifications on which such opinions are based, the consideration to be received by the WOW! Shareholders pursuant to the Transaction is fair, from a financial point of view, to the WOW! Shareholders.

Additional details concerning the rationale for the recommendations made by the WOW! Special Committee and the WOW! Board, including a copy of the Fairness Opinion, will be set out in the WOW! Circular to be filed and mailed to the WOW! Shareholders in the coming weeks, which, together with the Arrangement Agreement, will be available under WOW!'s SEDAR profile at


Dentons acted as legal counsel to WOW! in Canada and the United States. Each of Evolution Media Capital and Cormark Securities Inc. acted as financial advisor to WOW!.

Norton Rose Fulbright acted as Canadian and U.S. legal counsel to Genius Brands.

This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States pursuant to the United States Securities Act of 1933, as amended, or any state securities laws.

Conference Call

Genius Brands and WOW! will host a joint conference call at 10:30 am (Eastern time) today, Wednesday, October 27, 2021, to discuss the Transaction. The live webcast and replay will be available at:

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