Co. to funnel funds to studio

Ryan Kavanaugh’s Relativity Media is close to reaching a three-year output deal with Lionsgate covering four to five movies a year.

The deal has been rumored for several weeks in the wake of Lionsgate’s decision to reduce its annual inhouse production slate.

Under terms of the pact, Kavanaugh will put up all P&A and production costs for the Relativity pics. Lionsgate is already in business with Kavanaugh via its Mandate International unit, which sells Kavanaugh’s films in foreign territories.

Lionsgate and Relativity had no comment Monday about the pact.

For Relativity, the deal provides a dedicated domestic distributor for its product amid a crowded market — and a partner in Lionsgate that has scored repeated success with genre films such as the “Saw” series and the Tyler Perry titles.

Relativity received a $1 billion infusion in September from New York-based hedge fund Elliott Associates, leaving the production and finance shingle with more than $2 billion on its balance sheet. It then bought 4-year-old Rogue Pictures, a genre division that specializes in scary fare, for what some dub a bargain price of $150 million — and reupped its commitment to co-finance the majority of Universal’s slate through 2015.

In addition to structuring nearly $5 billion in film financing deals for Sony and U, Relativity’s also expanding its single picture business, with plans to make eight to 10 films per year. Recently wrapped pics include Jim Sheridan’s “Brothers,” starring Jake Gyllenhaal, Tobey Maguire and Natalie Portman; and Lasse Hallstrom’s “Dear John,” starring Amanda Seyfried and Channing Tatum.

For Lionsgate, the deal comes at a time when it’s been under pressure to reduce its annual operating costs, currently estimated at about $120 million. Carl Icahn, its third-largest shareholder with 14.5%, has made an offer for $350 million of Lionsgate debt after talks about the billionaire obtaining board seats collapsed last month.

Lionsgate reported a $93.4 million quarterly loss on Feb. 9. Since then, its “Tyler Perry’s Madea Goes to Jail” has grossed more than $90 million and “The Haunting in Connecticut” topped $46 million in three weeks.

This article was updated on April 14, 2009.

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