Lionsgate Acquires Summit for $412.5 Million

13 Jan, 2012 By: Erik Gruenwedel

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As expected, Lionsgate Jan. 13 said it has acquired Summit Entertainment in a cash and stock transaction worth $412.5 million.

By acquiring Summit, Santa Monica, Calif.-based Lionsgate enhances its feature-film and home-entertainment portfolios and further broadens its 13,000 title filmed entertainment library to include such titles as “The Twilight Saga” movies, The Hurt Locker and Red, among others.

“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 CEO Jon Feltheimer and vice Chairman Michael Burns in a statement.

The transaction is expected to be significantly accretive in Lionsgate's 2013 fiscal year beginning April 1.

Both studios 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 othercosts. It wasn’t immediately clear how the merger would affect Steve Nickerson, president of Summit Home Entertainment.

Summit this year releases the final “Twilight” installment, The Twilight Saga: Breaking Dawn — Part 2. The “Twilight” franchise, which has grossed more than $2.5 billion at the worldwide box office, should meld well with Lionsgate’s highly anticipated “Hunger Games” franchise, which opens on March 23 with The Hunger Games.

The majority of the purchase price was funded with cash on the balance sheet at privately-held 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.

Lionsgate, which lost $24.6 million in its most recent fiscal period, saw home entertainmentrevenue from both motion pictures and television programming top $175 million, a 15% increase from the prior year’s second quarter, as syndication of the first four seasons of “Mad Men” on Netflix more than offset a limited release slate in home entertainment. TV revenue reached a record $54.6 million, driven by electronic-media revenue from the syndication of “Mad Men” and the distribution of “Hell’s Kitchen,” as well as revenue from the release of Weeds: Season 6 on DVD.

International television revenue increased 51% from the prior year’s second quarter, led by deliveries of “Mad Men” (seasons one, two, three and four) and “Weeds” (seasons six and seven). Revenue from Lionsgate’s digital business, which includes transactional video-on-demand, increased 123% to a record $65 million.

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