With a deal valued at north of $50 million, the Lions Gate-Trimark merger is all but done.
Sources said that Lions Gate plans to utilize Trimark primarily as its video arm, effectively killing Trimark’s theatrical distribution. An announcement of the merger is expected in the next few days.
Trimark and Lions Gate have been waltzing for weeks and came close to tying the knot last month, but a couple of sticking points held up the works (Daily Variety, May 11). Biggest problem: the percentages Lions Gate would have to fork over in stock and cash. Naturally, Trimark wanted more cash, less stock; Lions Gate, the reverse. Sources indicate the split they worked out is roughly 50-50, but the price could fluctuate depending on movement in Lions Gate’s shares prior to closing the deal. The current deal is said to value Trimark stock at about $11 a share. The stock closed on Friday at $8.72.
Insiders said Lions Gate is also eyeing some combination of Lakeshore Entertainment, Harvey Entertainment and Kushner-Locke as potential acquisition targets. However, sources said Lions Gate’s initial overtures to Harvey received a cool reception.
The future of Lions Gate’s production arm could go one of two ways after the Trimark acquisition. Lions Gate has stated its intentions to grow its film production slate and take on bigger-budgeted projects and recently announced a new division, Avalanche Films, to make low-budgeted genre films primarily for video. That could make the Trimark theatrical production unit redundant. But the second scenario would see a blending of teams on this front.
Currently, Lions Gate Films Prods. is based in New York, but sources have indicated that Lions Gate intends to shrink its Gotham presence and focus its efforts on Los Angeles.
Industry observers view Trimark’s 600-title library as one of the primary drivers of the deal. Lions Gate would also inherit the $41 million still remaining on Trimark’s $75 million credit line with Chase Bank.
It’s unclear what the Lions Gate deal will mean for Trimark, which began in 1990 as the motion picture arm of onetime video major Vidmark. Trimark chairman Mark Amin has seriously flirted with a number of suitors in recent years, but has always backed away before any romance could be consummated.
In some ways, Trimark’s roots have remained in video. Despite years of trying to grow its production and distribution efforts, video has remained Trimark’s most consistently profitable division.
Lions Gate’s video product is serviced through its Toronto-based video label, Avalanche Video, and through the Los Angeles-based Sterling Home Video, in which Lions Gate holds a 50% stake.
Although the acquisition of Trimark will inevitably mean redundancies, it’s unclear which jobs are the most vulnerable to layoffs. A source close to the situation said that Lions Gate is examining employee contracts and may require Trimark employees to “re-interview” for their jobs.
Trimark’s stock has surged on takeover speculation. It’s jumped from a 52-week low of under $3 a share last fall to more than $10 last week. Lions Gate shares went the other direction, dipping to around $2 from a high of $5.
The volatility of Trimark shares is also due in part to the company’s small float, which would become much more liquid as part of the bigger Lions Gate.
Trimark’s market capitalization as of Friday stood at $40.6 million; Lions Gate’s at $72.7 million.
Representatives for Lions Gate and Trimark declined to comment.
(Jill Goldsmith and Charles Lyons contributed to this report.)