Distributors downplay recent discussions, which go back to fall of 2008
Are Lionsgate and Summit doing a mating dance again?Speculation about the minimajors reviving their merger talks was spurred Monday by a Bloomberg News report. One source noted that informal flirtation between the companies began earlier this year but had stayed under the radar. Another sourc close to the situation noted that Lionsgate is not the only company pursuing Summit. Spokesmen for Lionsgate and Summit refused to comment. The companies have held similar discussions in the past but those negotiations have collapsed over issues such as who would control the surviving entity, Lionsgate co-CEO Jon Feltheimer or Summit co-chairs Rob Friedman and Patrick Wachsberger. The two companies have had discussions about uniting going back as far as the fall of 2008, just before the bow of the first “Twilight” pic. Lionsgate in recent years has had on-again, off-again talks about a merger with MGM as well. On the film side, Lionsgate and Summit are both looking for advantage in a marketplace where the major have scaled back the production of mid-budget films in favor of tentpole and franchise properties — creating an opportunity for sizable indies to fill that gap. Privately held Summit could have the upper hand in any merger negotiation, given the stellar performance of “The Twilight Saga: Breaking Dawn — Part 1″ with $220.8 million domestically in its first 10 days. It also has a well-established foreign sales operation. Lionsgate has been seen its stock held down in recent years due to mixed performance by its feature films plus a barrage of criticsim from billionaire Carl Icahn, who agreed in late August to sell off his stake. It has an extensive TV operation with “Mad Men” and “Weeds” and could to structure a merger by tapping via a stock offering or with its more than $500 million in debt. Summit refinanced its debt in March, closing a new $550 million term loan as well as a $200 million revolving line of credit with plans to use the funds to pay down existing debt from the $1 billion in debt and equity raised four years ago when the company launched its effort to become a full-fledged production and distribution operation. Ratings agencies Moody’s Investors Service and Standard & Poors gave B ratings to Summit’s debt this year and cited concerns over the end of the “Twilight” franchise next year and the volatile nature of the feature film business. Summit will open the fifth and final “Twilight” film Nov. 16, 2012. It’s also developing a sequel to 2010’s Helen Mirren-Bruce Willis starrer “Red” and a reboot of the “Highlander” fantasy pic series. As for Lionsgate, it’s counting heavily on the four-picture “The Hunger Games” franchise with the first pic opening March 23. The “Hunger Games” trailer is attached to “Breaking Dawn.” Lionsgate announced last month that it had pared its net losses by about $5 million to $25 million last quarter while swinging to a $19 million operating loss from a $22 million profit a year ago on box office disappointments including “Conan the Barbarian,” “Abduction” and “Warrior.” It also announced two weeks ago that Alcon Entertainment had agreed to co-finance Lionsgate’s “What to Expect When You’re Expecting,” scheduled for domestic release on May 11.