Yesterday, Jeff Bezos went full James Bond and announced a deal to acquire MGM Studios, the Hollywood studio they had been eyeing since 2018. It's Amazon's 2nd largest transaction, after their $13.7 billion Whole Foods deal, and will cost them $6.5 billion, $8.5 billion including debt.
The strategic rationale here is to give Amazon Prime Video (2nd largest streaming service behind Netflix with 200+ million subs) a library of over 4,000 movies, including "James Bond," "Rocky" and "The Silence of the Lambs," and TV shows such as "Fargo" and "Vikings." The deal comes as streaming wars heat up and all the big boys (Netflix, Disney, ViacomCBS) battle for content, with both in-house production and M&A. Earlier this month, AT&T announced spinning of its media assets and merging them with Discovery.
The deal was also a big win for some hedge funds like Anchorage Capital, who will make a $2 billion profit after their $500 million investment in 2010. That implies an IRR (annualized return) of 16% over the 11 years they held the investment. (really seems like an eternity in the pump & dump crypto world we live in)
Short Squeez Takeaway: Just because the deal was announced does not mean it will go through, as it will have to clear some intense regulatory hurdles. Amazon is the company all politicians love to hate on. Many have called for a break-up of its Whole Foods and AWS divisions. Sen. Amy Klobuchar, who was against Amazon's Whole Foods acquisition, is now head of the Senate’s antitrust subcommittee. (grab your popcorn)