Los Angeles Times - 05.03.2020

LATIMES.COM/BUSINESS THURSDAY, MARCH 5, 2020C3

fifth worldwide, behind Pen-
guin Random House, Ha-
chette Livre, HarperCollins
and Macmillan Publishers.
Simon & Schuster prob-
ably will be sold to another
publishing firm looking to
merge assets and create cost
savings.
Potential buyers may in-
clude Rupert Murdoch’s
News Corp., which owns
HarperCollins; the French
company Lagardère Pub-
lishing, which owns Ha-
chette Livre; German media
giant Bertelsmann, which
owns the majority stake in
Penguin Random House; or
perhaps a private equity
firm such as KKR, which has
shown interest in digital
publishing.
Since Amazon emerged
as the dominant bookseller,
publishing houses have
scrambled to preserve their
influence in the market and
there have been several con-
solidations.
In December, Bertels-
mann announced that it
would pay $675 million for

the remaining 25% stake in

Penguin Random House

from the British firm Pear-

son, which would make Ber-

telsmann the sole owner of

the world’s largest book pub-

lishing operation. That deal

is undergoing regulatory re-

view.

Bertelsmann’s move to

own all of Penguin Random

House came six years after it

and Pearson stunned the in-

dustry by combining Pen-

guin and Random House.

That tie-up, which trimmed

the Big Six to five, prompted

others.

Since 2013, Hachette

Book Group has acquired

several smaller firms, in-

cluding Hyperion from Walt

Disney Co., Minnesota-

based Meadowbrook Press

and the Perseus Books

Group. In 2014, News Corp.

acquired the romance novel

giant Harlequin Enter-

prises, based in Toronto.

When the stand-alone

CBS controlled Simon &

Schuster, the company cre-

ated synergies by booking

its authors on “60 Minutes,”

which explored timely and

provocative subject matter.

In addition, CBS parlayed

Simon & Schuster’s rela-

tionship with King to create

such television shows as

“Under the Dome.” But now

the publishing house is part

of a larger corporation that

is eager to sell assets to pay

down debt.

“We are a great publish-

ing house and one of the

world’s best known publish-

ing brands, with an incred-

ible legacy and bright fu-

ture,” Simon & Schuster

Chief Executive Carolyn

Reidy wrote Wednesday in a

memo to her staff. “We

have a tremendous track

record of producing best

sellers in every category and

format, and for readers of ev-

ery age.”

Simon & Schuster was

founded in 1924 by Richard

L. “Dick” Simon and M. Lin-

coln “Max” Schuster. Their

initial project was a cross-

word puzzle book, which was

a roaring success.

The company has since

grown to become a diverse

house that publishes ap-

proximately 2,000 titles a

year. Its divisions include Si-

mon & Schuster Publishing,

Scribner Publishing Group,

Atria Publishing Group and

Gallery Publishing. Simon &

Schuster and its imprints

have won 56 Pulitzer Prizes

and numerous National

Book Awards and Newbery

and Caldecott Medals.

ViacomCBS’ stock has

been bludgeoned since the

merger was announced in

August. Back then, the two

companies together were

worth nearly $30 billion. But

since the combination was

completed in early Decem-

ber, shares have continued

to decline. On Wednesday,

ViacomCBS shares closed

up 2 cents at $23.10, valuing

the business at less than

$14.5 billion.

The company previously

announced the sale of the

landmark CBS head-

quarters building in Mid-

town Manhattan, known as

Black Rock. ViacomCBS

plans to use the proceeds

from the two sales to pay

down debt, pay dividends to

shareholders and buy back

stock.

“It’s a tremendous value

creation opportunity,” Bak-

ish said.

Publishing house Simon & Schuster up for sale

SIMON & SCHUSTER’Sclassics include “Gone

With the Wind” and “A Farewell to Arms.”

Sara WaberCNG

[Publisher,from C1]

Quibi said it raised

$750 million in its second

round of financing, a boon

for the Hollywood streaming

service that launches early

next month.

The company, led by its

chief executive, tech veteran

Meg Whitman, and chair-

man, Jeffrey Katzenberg,

has now raised a total of $1.75

billion.

The additional invest-

ment will give the company

“tremendous flexibility and

the financial wherewithal to

build content and technol-

ogy that consumers em-

brace,” Chief Financial Offi-

cer Ambereen Toubassy

said in a statement.

The upstart streamer

said its latest round of fund-

ing came from new and ex-

isting investors, including

studios, tech companies and

strategic partners it de-

clined to identify. The $750-

million second round in-

cludes a $400-million invest-

ment that Whitman had

mentioned earlier this year.

Quibi, which stands

for “quick bites,” will roll out

175 original shows and 8,500

episodes in its first year,

each 10 minutes long or less.

The company will offer

scripted and unscripted pro-

grams, including cinematic

stories told in short chap-

ters.

The content is designed

for mobile phones. In some

shows, viewers can watch

horizontally or vertically,

which may uncover different

camera perspectives on the

shows they watch. Holly-

wood stars working on Quibi

content include Jennifer

Lopez, Liam Hemsworth

and director Catherine

Hardwicke.

“We have strong content

and an app design and user

interface which is resonat-

ing with early users,” Whit-

man said in a statement.

The service launches

April 6 and will cost $4.99 a

month with ads and $7.99 a

month without ads.

Some industry observers

say Quibi could revolution-

ize the market for premium

short-form video. But others

are skeptical, as similar ef-

forts such as Verizon’s Go90,

failed to capture a large

enough audience for adver-

tisers.

Several executives have

left Quibi before its launch,

including Diane Nelson, the

company’s head of content

operations and a former

president of DC Entertain-

ment. Earlier this year,

Whitman also had to back-

track after comparing how

journalists build relation-

ships with sources to how

sexual predators groom

their child victims, accord-

ing to news site the Informa-

tion. Whitman later apolo-

gized.

Quibi has touted its

strong advertiser support,

reporting it has sold out its

$150-million ad inventory for

its first year. Quibi’s adver-

tising partners include Proc-

ter & Gamble, T-Mobile and

Walmart.

Quibi

raises

more

funding

By Wendy Lee

United Airlines Holdings
Inc. plans to trim flights,
freeze hiring and halt merit
pay raises as it grapples with
a swift drop in travel de-
mand because of the co-
ronavirus outbreak.
The domestic schedule
will be pared 10% in April and
international flying will be
chopped 20%, United said in
a message to employees.
Similar reductions will prob-
ably be necessary for May,
Chief Executive Oscar
Munoz and President Scott
Kirby said Wednesday in the
memo.
United has also imposed
a hiring freeze through June
30 and deferred merit-based
salary increases for manage-
ment until July 1, in an effort
to prepare the company fi-
nancially for a steep down-
turn in business. The Chi-
cago carrier will also offer
employees voluntary unpaid
leaves of absence.

The dramatic moves

flashed a new warning sign

as airlines across the world

grapple with an abrupt de-

cline in passengers while

governments rush to con-

tain the virus’ spread.

United is joining carriers

from Asia to Europe, which

have slashed their schedules

and grounded aircraft amid

falling demand and the can-

cellation of large trade

shows and other events.

“A lot has changed since

this weekend,” Munoz and

Kirby said. “We certainly

hope that these latest mea-

sures are enough, but the dy-

namic nature of this out-

break requires us to be nim-

ble and flexible moving for-

ward.”

A Standard & Poor’s in-

dex of major U.S. airlines fell

23% in the seven trading ses-

sions that ended Tuesday, as

the economic fallout from

the virus’ spread intensified.

That was the biggest drop

on the S&P 500 index.

Along with United,

American Airlines Group

Inc. and Delta Air Lines Inc.

have temporarily halted

flights to China, where the

virus originated. But Ameri-

can and Delta haven’t

adopted cost-control mea-

sures as significant as those

unveiled by Munoz and

Kirby.

United said transpacific

flying makes up about half of

the planned 20% in cuts for

April, with service to Europe

and Latin America also af-

fected. The reductions will

also prompt the airline to

ground some of its larger in-

ternational wide-body air-

craft, which include Boeing

777 jets and 787 Dreamliners.

In the U.S., the cuts will

come largely from frequency

reductions on most routes,

but United will also suspend

some service to cities that it

serves from multiple hubs.

The airline is also changing

aircraft sizes on certain

routes to adjust for the

schedule reductions.

Last month, United with-

drew its 2020 profit forecast,

citing the financial effect of

the virus outbreak and the

resulting uncertainty. The

company also postponed its

March 5 investor meetings

because of the issue. Hawai-

ian Holdings Inc. also scrub-

bed an investor event set for

March 9, citing the virus out-

break.

Bachman writes for

Bloomberg.

Virus leads United to cut flights, stop hiring

By Justin Bachman

UNITEDwill pare its domestic flights by 10% and

international ones by 20% in April and possibly May.

Scott OlsonGetty Images

Big batteries have long
been touted as the future of
the electrical grid and a key
to unlocking solar and wind
power. But when entrepre-
neur David Cieminis sought
financing for a storage proj-
ect in California, a state des-
perate to wean itself off of
fossil fuels, he couldn’t reel in
a bank.
“A month or two ago, I
wouldn’t have thought that
they would have been inter-
ested,” says Cieminis, co-
founder and chief commer-
cial officer of Able Grid Ener-
gy Solutions. Like other bat-
tery start-ups, the company
wound up relying on more
expensive private equity for
the project.
Little energy storage ex-
ists on the world’s electrical
grids. The U.S. has about
1,400 megawatts of battery
storage — equivalent to the
output of two natural-gas-
fired power plants — with
most of it on the country’s
electrical grids.
Banks’ reluctance to fi-
nance such projects has con-
tributed to the limited stor-
age. But batteries are con-
sidered essential if states
such as California want to
rid their power grids of car-
bon emissions in the next
three decades.
At the same time, manu-
facturing of lithium-ion bat-
teries is scaling up rapidly to
meet the growing demand
for electric vehicles and large
systems installed in power
grids or at solar farms. As
prices for lithium-ion batter-
ies drop — they fell by half
from 2016 to 2019, according
to BloombergNEF — banks
are taking another look.
Stand-alone storage
deals also have been scarce

because of the newness of

the product — project con-

tracts aren’t yet stand-

ardized, says Yayoi Sekine,

an analyst at

BloombergNEF. The size of a

project can be a concern for

banks too. They prefer to

avoid financings of $50 mil-

lion or less, a threshold some

early stand-alone systems

didn’t cross.

Able Grid launched in

2017 to go after two large re-

newables markets: sunny

California and windy Texas.

It focused first on project de-

velopment.

Cieminis approached

banks early last year about a

50-megawatt project in the

Lone Star State, but there

were no takers. The banks

said the Texas project lack-

ed a long-term revenue

stream, and that the compa-

ny’s 11-megawatt project in

California was too small.

The lenders’ most com-

mon refrain about the Cali-

fornia project: “I don’t want

to write a check for $10 mil-

lion,” Cieminis says he was

told. By October, he gave up

trying and found an alterna-

tive funding source.

In early February, on a

whim, he approached a few

lenders that had completed

storage financings. He was

pleasantly surprised to find

interest in two other Able

Grid projects — 100-

megawatt facilities in South-

ern California and Texas.

Recognizing the sizable

opportunity in batteries,

some project finance banks

have recently begun sup-

porting battery devel-

opments, and others expect

to follow soon.

The U.S. Energy Storage

Assn. trade group is aiming

to have 35,000 megawatts

online by 2025. There are

also climate change implica-

tions.

Banks aren’t the only

companies that have ap-

proached battery financings

cautiously. Others have con-

cerns about being a first

mover.

“We don’t want to be the

first company to go through

their credit committee,”

says Jeff Bishop, chief execu-

tive of Key Capture Energy, a

battery storage developer.

Some early concerns

among lenders have abated.

Banks are now largely com-

fortable with lithium-ion

batteries. “They’re the bat-

tery in your Tesla, in your

iPhone,” says Mike Lorusso,

a managing director at CIT.

CIT was a lead bank on a

$140-million loan last month

for a portfolio of projects de-

veloped by EsVolta, a Cali-

fornia developer. The deal

came after about six months

of talks between Chief Fi-

nancial Officer Krish

Koomar and banks. It’s Es-

Volta’s first debt financing.

Mitsubishi UFJ Financial

Group Inc., one of the

world’s leading project fi-

nance banks, expects at

least three stand-alone bat-

tery deals in the U.S. this

year, says Erik Codrington, a

managing director.

Able Grid financed its

first two projects through an

undisclosed private equity

firm. Such investors expect a

return of at least 10%, where-

as bank debt can often be

had for 4% to 5%. Cieminis is

more optimistic that his lat-

est projects will attract bank

finance.

“There’s a learning proc-

ess,” he says. “It takes time

for the market to ramp up.”

Kniazhevich and Eckhouse

write for Bloomberg.

Banks begin to back giant batteries

Builders of facilities

seen as the future of

electrical grid no

longer have to rely on

private equity funds.

By Natalia
Kniazhevich
and Brian Eckhouse

UNITED POWERinstalls Tesla batteries at its energy storage facility near Longmont, Colo., in 2018. The U.S.

has about 1,400 megawatts of battery storage — equivalent to the output of two natural-gas-fired power plants.

Aaron OntiverozDenver Post