Lionsgate Extends CEO Jon Feltheimer's Deal

Company pursues continuity in exec suite

In an impressive vote of confidence, Lionsgate has extended the employment deal for chief executive officer Jon Feltheimer until May, 2018.

The deal comes with Lionsgate having succeeded in establishing itself as a seventh Hollywood studio following its $412 million purchase of Summit Entertainment early last year.

“We are pleased to make this early decision to extend Jon’s tenure as CEO until 2018, providing Lionsgate with extraordinary continuity as he and Michael Burns continue to grow the company into a next generation global content leader,” said Lionsgate chairman Mark Rachesky.

Wall Street has been a strong supporter of Lionsgate, with the stock having quadrupled in less than two years due to success in young-adult franchises such as “Twilight” and “The Hunger Games,” and a growing TV operation with such shows as shows “Mad Men” and “Nurse Jackie.” It finished fifth among the majors in 2012 with $1.24 billion in domestic box office and currently has 28 TV shows on 20 networks.

The stock was trading in the $7 range in August 2011 when Feltheimer and vice chair Michael Burns worked out a deal to cash out Carl Icahn’s 33% stake, ending three years of battling with the combative billionaire. The stock closed at a record high Monday, gaining 2.4% as it rose 69 cents to $29.49.

Over the past  year, Lionsgate has sought continuity in its exec suite. It has reupped Burns, longtime chief financial officer James Keegan, Wayne Levin as general counsel and chief strategic officer, co-chief operating officers Steve Beeks and Brian Goldsmith, and Jason Constantine as president of acquisitions and co-productions for its motion picture group.

Feltheimer and Burns have been in charge of Lionsgate for the past 13 years. The company noted Monday that Lionsgate’s market capitalization has increased from $80 million to nearly $4 billion during Feltheimer’s tenure as CEO.

We believed in Jon’s early vision of how to best position Lionsgate to grow and adapt to a rapidly changing industry,” Rachesky said. “He has successfully executed on a business plan which required discipline, patience and investment in all of the company’s key business segments in order to create highly valuable content and long-term value for shareholders.”

In a filing with the Securities and Exchange Commission, Lionsgate disclosed that Feltheimer will receive an annual base salary of $1.5 million and will be eligible to receive an annual performance bonus with the target bonus equal to the base salary and the rest to be paid in the form of stock.

“The agreement also provides for Mr. Feltheimer to participate in the company’s usual benefit programs for executives at his level, as well as company-provided life and disability insurance coverage, reasonable club membership dues and limited use of the company’s private aircraft,” the filing said.

Feltheimer was also granted an option to purchase 2 million common shares and an award of 200,000 restricted stock units.

A trio of Wall Street analysts raised their price targets after the market closed Friday with David Bank of RBC Capital increasing his to $31; Alan Gould of Evercore raising his target to $34 from $30; and Alexia Quadrani of JP Morgan going  from $26 to $32.

Bank wrote, “Forward visibility into LGF’s robust earnings stream through FY16 is unparalleled in the studio peer universe. Bankable ‘Hunger Games’ strength, momentum in the TV business, solid cash flow generation and capital allocation command a premium multiple as LGF incubates new franchises like ‘Divergent.’ With no major releases until November scheduled, simply put, not much can go wrong near term.”

Gould estimated that “Catching Fire,” the sequel to “The Hunger Games” will generate almost $350 million of profits.

Quadrani said, “While we are very mindful of the sizable outperformance in the share price year to date (up 81%), we believe the momentum will continue, particularly late this calendar year in advance of the release of ‘Enders Game’ and ‘Catching Fire’ in November, followed by ‘Divergent’ in March.”

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