Spectrum in $175m Classic Media recap

The Boston-based private equity firm will recap the media entertainment company in a transaction valued at $175 million, as rumors swirl about a possible counter-bid on UK entertainment firm HIT.

Spectrum Equity Investors, alongside initial investor Pegasus Capital Advisors, has purchased a majority stake in Classic Media via a $175 million recapitalization. Spectrum is providing $75 million (€58 million) in equity and $100 million in debt.

According to a statement, the recap was to “fund future growth and acquisitions”. The debt is being provided by JP Morgan.

The deal comes amidst reports that Spectrum and Classic will work with Thomas H. Lee Partners in a bid for UK entertainment firm HIT Entertainment, which owns the rights to such children’s characters as Barney the Dinosaur and Thomas the Tank Engine. Apax Partners made a bid for HIT earlier this spring. 

Cos Cob, Connecticut-based private equity firm Pegasus is an existing investor in Classic Media, along with a consortium including book publisher Random House. They reportedly provided the company with $50 million in seed money in 2000. 

The investment was part of Pegasus Partners II, which closed on more than $550 million in March 2000.

Classic Media owns an entertainment library with more than 3,000 television and movie titles, including a number of children’s characters like Rocky and Bullwinkle, Casper the Friendly Ghost, Underdog, Lassie and The Lone Ranger. The company also owns the rights to a number of comic books from the Harvey, Dell and Golden Key lines. The firm was founded in 2000.

Pegasus has $1.1 billion in assets and focuses on the distressed mid-market sector, investing in Cannondale Bicycle Company and American Wholesale Insurance Group. It was founded in 1996 by Craig Cogut and Rodney Cohen.

Spectrum was founded in 1994 and has more than $4 billion under management. The firm focuses on media, business and communications firms and has invested in Loews Cineplex Entertainment and Consolidated Communications.