Lionsgate buys Summit Entertainment for $412.5 Million and The Twilight Saga may continue. The Lionsgate acquisition of Summit Entertainment (in cash and stock) has been in the works for some time but most people believed with the release of The Twilight Saga: Breaking Dawn – Part 2, Twilight was finally being put to bed, much to the delight of true horror, vampire, and werewolf fans. Now it seems that is not the case. First the acquisition news.
The official press release from Lionsgate about the purchase of Summit Entertainment:
Lionsgate and Summit Entertainment today announced that Lionsgate has completed a transaction to acquire Summit for a combination of cash and stock valued at $412.5 million.
The transaction unites two leading studios with powerful brands and complementary assets, solidifying Lionsgate’s position as the world’s largest and most diversified independent entertainment company. By acquiring Summit, Lionsgate enhances its feature film and home entertainment offerings and further broadens its 13,000 title filmed entertainment library to include such titles as The Twilight Saga, The Hurt Locker and Red. The integration of both Summit’s domestic and international theatrical film operations will significantly enhance Lionsgate’s production and distribution capacity, while also extending the Company’s worldwide reach and creating a dominant international sales organization.
The transaction brings together Summit’s Twilight Saga feature film franchise, which has already grossed more than $2.5 billion at the worldwide box office, and Lionsgate’s highly anticipated Hunger Games franchise, which opens on March 23, 2012. Lionsgate will also continue to benefit from its premier television production and distribution business, its array of branded film and television properties, its suite of branded channels and its success as an innovator in creating and distributing content for digital platforms. Both the Lionsgate and Summit labels are expected to continue and be active in the production and distribution of films, although the combined company expects to realize significant synergies through the consolidation of administrative and other costs.
“This transaction continues Lionsgate’s long-term growth strategy of building a diversified worldwide media company through a combination of disciplined, accretive strategic acquisitions and organic growth while maintaining a solid balance sheet,” said Lionsgate Co-Chairman and Chief Executive Officer Jon Feltheimer and Vice Chairman Michael Burns. “We are uniting two powerful entertainment brands, bringing together two world-class feature film franchises to establish a commanding position in the young adult market, strengthening our global distribution infrastructure and creating a scalable platform that will result in significant and accretive financial benefits to Lionsgate shareholders. Rob Friedman and Patrick Wachsberger have built a remarkable organization, and we’re pleased to welcome Summit’s talented team to the Lionsgate family. Lionsgate’s growth has been built over the years in part by the successful acquisition and integration of companies like Trimark, Artisan, Redbus, Debmar-Mercury, Mandate and TV Guide Network and, in each case, Lionsgate has emerged stronger and the Company’s brand has become more resonant.”
More on the acquisition’s key players:
“Jon Feltheimer, Michael Burns and the rest of the Lionsgate team have built an exciting and entrepreneurial content leader over the past 12 years, and we’re delighted to join together these two great companies,” said Summit Entertainment’s Co-Chairmen Rob Friedman and Patrick Wachsberger. “We believe that the combined entity will be even greater than the sum of its parts and our dramatically enlarged media platform will create tremendous opportunities for all of us within the Summit and Lionsgate families. We want to thank our employees, whose hard work and creativity have led to the successful evolution of Summit into a leading worldwide studio, and the combination of Lionsgate and Summit will be the next chapter in creating a true global media powerhouse.”
“As demonstrated by this acquisition, Lionsgate remains focused on preserving a strong balance sheet while pursuing its long-term growth strategy,” said Dr. Mark H. Rachesky, Co-Chairman of the Lionsgate Board of Directors. “We are big believers in the increasing value of content and this transaction strengthens Lionsgate’s asset base while providing significant financial benefits, including highly visible cash flow and revenue. We are looking forward to realizing the value of a Lionsgate-Summit combination for all Lionsgate shareholders.”
Here is how Summit Entertainment was valued and what funded the Lionsgate, Summit Entertainment acquisition:
The majority of the purchase price was funded with cash on the balance sheet at Summit. The remainder was funded with $55 million of existing Lionsgate cash, $45 million of cash received from a newly issued series of Lionsgate convertible notes, $50 million of Lionsgate common stock and an additional $20 million of cash or stock to be issued at Lionsgate’s option within 60 days. At closing, Summit’s existing term loan was refinanced with a $500 million debt facility, secured by the collateral of the Summit assets. Although the term loan matures in 2016, the Company anticipates repaying the loan well before the maturity date, due to the significant cash flow the business is expected to generate. In addition, this expected cash flow will facilitate the Company’s financial objective of further deleveraging Lionsgate’s balance sheet. The transaction is expected to be significantly accretive in Lionsgate’s 2013 fiscal year beginning April 1, 2012.
You can say that again. With the purchase of Summit Entertainment, it seems Lionsgate has no intention of letting a money maker like The Twilight Saga lay on the shelf. “Summit investors wanted to get this deal done before Twilight ended and Summit’s overall value fell”, an intelligent business motivation and one that showed situational analysis.
Of course Lionsgate knew this and could have waited for that price evaluation fall but with Breaking Dawn – Part 2 yet to be released, four wind falls awaited: The revenue from that Twilight film’s theatrical release, Blu-ray/DVD sales of its home release and the home release of The Twilight Saga: Breaking Dawn – Part 1, the future profits from all the other home releases of the other Twilight segments, and The Twilight Saga‘s continuation.
The chief executive of Lions Gate Entertainment…believes the film franchise will continue to have value to his company, even after the Nov. 16 release of the fifth movie completes the adaptation of author Stephenie Meyer’s four books.
“I’m anticipating ‘Breaking Dawn Part 2’ being $700 million-plus in worldwide box office,” said Jon Feltheimer, predicting the next film would slightly outdo the $697 million global take of “Breaking Dawn Part 1.”
Asked whether the franchise would continue in some form for Lions Gate, he added, “It’s hard for me to imagine a movie that does $700 million-plus doesn’t have ongoing value. It’s an amazing franchise that they have done a great job of maintaining with absolutely no deterioration. So the simple answer is ‘Boy I hope so.'”
One person close to the acquisition deal but not authorized to speak publicly suggested that because Lions Gate, unlike Summit, has a television production unit, it could adapt “Twilight” for the small screen.
Asked whether there was a possibility of bringing “Twilight” to television, Feltheimer answered, “I would certainly hope so.”
Twilight on TV, lol. Well, the effects quality will be exactly the same as the films. If it does happen, hopefully it will land at FX Network, HBO, Showtime or Starz. Then at least the show will be no-holds-barred.