Analysis: Elaborate negotiations with Summit notable for lack of drama

Lionsgate buys Summit for $412.5 million | Wall Street mulls deal’s benefits

Lionsgate’s $412.5 million deal to buy Summit Entertainment, announced Friday, arrived with a notable lack of fireworks.

“There was never really much drama in this negotiation,” noted James Berk, CEO of Summit investor Participant Media. “It really unfolded in a pretty orderly fashion. I think that’s kind of unique.”

When the deal announcement came a few minutes after the close of markets Friday afternoon, the one real surprise to many was that the transaction wasn’t a tentative agreement but a complex completed transaction — financed as a leveraged buyout that cashes out Summit’s investors with a stake of about 5% in the amplified Lionsgate.

Summit’s ownership — which includes top Summit execs, Nala Investments and Suhail Rizvi’s Rizvi Traverse Management — had been considering early last year a move into TV production as a way to diversify operations from the core businesses of film production and foreign sales in order to take advantage of the success of the “Twilight” franchise. Toppers Rob Friedman and Patrick Wachsberger told Variety last February that the first moves would take place in the following months.

“We were looking into the funds it would have taken to expand,” Berk noted. “At the same time, Summit became very attractive as a potential acquisition so these conversations started with multiple parties.”

Besides monetizing the investment of the Summit owners, Berk said, the Lionsgate deal offers the benefits of being able to take better advantage of the “Twilight” and “Hunger Games” franchises, long-term stability, monetization of the Summit library and the firepower to compete effectively with the big six studios.

“This really is the right deal at the right time,” he added.

Berk also expects the deal to benefit Participant, which is already halfway through a five-year output deal with Summit and looking to ramp up feature production and move into TV production. The eight-year-old company — focused on areas such as the environment, healthcare, human rights, institutional responsibility, peace and tolerance — has backed “Syriana,” “Inconvenient Truth,” “Charlie Wilson’s War,” “Contagion” and “The Help.”

Berk admitted that he’s cognizant of there being one less buyer in Hollywood.

“On the one hand, it is frustrating to lose a player in the feature film market,” Berk told Variety following the announcement. “But if the company executes, there’s plenty of capacity for its product.”

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