Structuring Asset Contribution for New Studio Services DropCo

February 26, 2026 at 11:07 AM|7 min|JAMES ADCOCK, JD BUSFIELD
Neutral

Bottom Line

The parties are structuring a complex asset contribution from multiple entities into a new 'DropCo' in a potential tax-free reorganization under Section 721. The equity treatment for one party is still to be negotiated based on risk-reward preferences.

Key Takeaways

Deal Structure:: Multiple entities from two sides (MT Studio Services/Packet Co. and Hudson Pacific) will contribute assets/liabilities into a new 'DropCo', with fleet assets separated into a single asset company.

Equity Negotiation:: The form of Hudson Pacific's membership interest (preferred vs. common equity) in DropCo is pending final negotiation, representing a choice between lower risk/reward and higher risk/reward.

Tax Analysis:: There is high-level confidence that a tax-free reorganization under Section 721 is possible for this transaction.

Excluded Asset:: The assets and operations of 'Transportation Resources' are currently being held back from the contribution and may be addressed separately.
Action Items
Create a straw man/structure document by feeding the discussed deal mechanics and provided information into a model or template. — JAMES
Verify the final structure with tax advisory to ensure it supports a tax-free reorganization under Section 721.
Determine the final treatment (preferred or common equity) of HPP's membership interest in DropCo based on the culmination of parties' negotiations.
Clarify the status and potential future inclusion of the 'Transportation Resources' entity/assets, which were held back from the current contribution plan.
Establish the new OpCo for non-fleet assets and liabilities and the single asset company for all fleet assets as outlined in the structure.
Topics
Asset Contribution Structure Tax-Free Reorganization (Section 721) Equity Negotiation (Preferred vs Common) Entity Consolidation Excluded Assets (Transportation Resources)

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