NEW YORK - Scholastic (NASDAQ:SCHL) Corporation (NASDAQ:SCHL), a global children's publishing, education, and media company, has announced a strategic investment in 9 Story Media Group, acquiring 100% of the economic interest and a minority of the voting rights for approximately $186 million. This investment is expected to close in the first quarter of Scholastic's fiscal 2025, starting June 1, 2024, subject to customary closing conditions.
The deal will integrate Scholastic's trusted brand and publishing assets with 9 Story's production, distribution, and licensing capabilities, aiming to expand Scholastic's reach across various media platforms. Scholastic Entertainment and 9 Story have previously collaborated on projects such as the animated series "Clifford the Big Red Dog" and "Eva the Owlet."
Peter Warwick, Scholastic President and CEO, expressed enthusiasm for the potential to deepen connections with young audiences by bringing book stories to life on screens and through merchandising. Iole Lucchese, Scholastic Board Chair and President of Scholastic Entertainment, also highlighted the opportunity to build global franchises on every platform, creating value for creators and shareholders.
9 Story's divisions include Brown Bag Films, an award-winning animation studio, and 9 Story Distribution International, which handles global distribution for children's programming. The company has been gaining momentum with recent deals, including a partnership with Crayola Studios and the acquisition of Portfolio Entertainment's content.
Vince Commisso, President and CEO of 9 Story, cited the long-standing relationship with Scholastic and the synergies between the two companies' capabilities in content development and distribution.
Scholastic plans to fund the transaction from available cash and a revolving credit facility, maintaining its regular dividend and stock repurchase program. The company expects the acquisition to contribute to long-term earnings growth and reduce production capital intensity.
9 Story reported revenue of approximately $104 million for the fiscal year ended August 31, 2023. Scholastic anticipates that the addition of 9 Story will drive substantial improvements in top-line growth and bottom-line results.
This investment is based on a press release statement.
InvestingPro Insights
As Scholastic Corporation (NASDAQ:SCHL) moves to leverage its recent strategic investment in 9 Story Media Group, the company's financial health and market performance offer valuable insights. Scholastic's commitment to enriching its media presence is underscored by a solid financial foundation, as evidenced by the company's market capitalization of approximately $1.18 billion. This move is supported by an attractive Price/Earnings (P/E) ratio of 21.53, which suggests investor confidence in the company's earnings potential.
Additionally, Scholastic's prudent financial management is reflected in its ability to maintain a strong cash position relative to its debt, highlighting a robust balance sheet. This is further complemented by the company's shareholder-friendly actions, including a consistent dividend payout for 17 consecutive years and a high shareholder yield, as per InvestingPro Tips. Such fiscal responsibility could provide Scholastic with the flexibility to navigate the integration of 9 Story's operations effectively and to continue investing in growth opportunities.
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With an eye on the future, the company's recent performance metrics, such as a gross profit margin of 54.66% for the last twelve months as of Q2 2024, demonstrate Scholastic's ability to manage its production costs effectively, which could be a significant advantage as it integrates 9 Story's content creation capabilities. The strategic investment in 9 Story Media Group is poised to potentially enhance Scholastic's revenue streams and solidify its position in the competitive children's media landscape.
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