Wall Street enthused after filing on Summit buy

Lionsgate’s $412.5 million leveraged buyout of Summit Entertainment continues to receive an upbeat response from Wall Street.

Shares gained 4% Wednesday, up 40¢ to $10.48 in the wake of the mini-major’s 8K filing with the Securities and Exchange Commission detailing its presentation to its lenders for the Summit acquisition and refinancing. Shares are up 20% since the deal closed on Jan. 13.

Stifel Nicolaus analyst Benjamin Mogil repeated his buy rating Wednesday with a $12.50 target price.

“The disclosure supports our view that the transaction is a favorable one, the rationale behind our recent upgrade in the stock,” he said in a research note. “We continue to see the Summit deal’s LBO structure as granting Lionsgate sufficient flexibility to complete/distribute the remaining Summit slate while harvesting the ‘Twilight’ cash flows.”

The fifth and final “Twilight” entry comes on Nov. 14.

The filing showed that Summit’s revenues and earnings before interest, taxes, depreciation and amortization in 2009 were, respectively, $722 million and $159 million, followed by $1.15 billion in revenues and $368 million in EBITDA in 2010. Mogil said the 2009-10 financials support his view that the “Twilight” franchise can generate $265 million in EBITDA this year and $200 million next year. EBITDA is a metric closely followed by Wall Street.

Recent analyst upgrades include Evercore Partners upgraded from an “equal weight” to an “overweight” and Miller Tabak from a “neutral” to a “buy.” In addition, Moody’s Investors Service and Standard & Poors both disclosed two weeks ago that they were reviewing credit rating on Lionsgate for possible upgrades.

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