Peter Guber has cut himself yet another sweet deal.
As expected (Daily Variety, March 9), the former Sony chief has teamed his Mandalay Entertainment with both Frank Giustra’s Lions Gate Entertainment and Paramount Pictures in a deal that could yield 20 pics over five years.
The three partners announced the pact Monday. As late as last week, Mandalay was flirting with Warner Bros. as a potential home, and prior to that, Universal.
“It was always a question of looking at three companies and trying to find the right fit,” said Guber. “Paramount is the most complementary situation for us.”
Lions Gate subsidiary LG Pictures, headed by president Peter Strauss, has taken a 45% stake in Mandalay for about $75 million.
The other 55% of Mandalay will be owned by Guber, Mandalay vice chairman Paul Schaeffer and president Adam Platnick.
However, Guber will remain the largest overall shareholder in the company.
“It’s an opportunity to go to a new environment,” said Guber, who has been with Sony first as chairman and then producer for about 10 years. “It came down to a combination of economics and emotional dynamics.”
The move will reunite Guber with the studio for which he exec produced the 1983 hit “Flashdance.” It also brings him back together with former Sony exec Jonathan Dolgen, who is now chairman of Viacom Entertainment Group.
The Mandalay exit will leave a hole in the Sony distribution pipeline. Mandalay has six pics due out this year through Sony, including “Wild Things,” “Les Miserables,” “Dance With Me,” “Gloria” with Sharon Stone, the Michelle Pfeiffer starrer “Deep End of the Ocean” and the sequel to Mandalay’s biggest box office hit, “I Still Know What You Did Last Summer.”
As part of the deal, Mandalay will finance its own overhead and development as a “stand-alone” company. LG will contribute a “small portion” of the overhead, per Giustra and Lions Gate investor relations exec Karen Fiseman.
Paramount will market and distribute Mandalay’s films domestically. A source at Paramount described the deal as “very low risk” to the studio.
Overseas, Mandalay has partners in U.K. (Entertainment Film Distributors), Germany (Neue Constantin), Spain (TriPictures), Italy (Cecchi Gori) and Australia and Greece (Village Roadshow). Moreover, the company is about to strike distribution partnerships in Japan and France.
All other international distribution outside the partner territories will be handled by Paramount, which sources said was “likely” to put the films through UIP.
Per Giustra, “no less than” 90% of each film’s budget would be financed by distribution advances from Paramount and the foreign partners, while “no more than” 10% would come from LG.
Mandalay and the distribution partners will finance the P&A in the partner territories. After they have recouped their investment and P&A costs on each pic, LG will recoup its investment. Further revenues will be split 45% to 55% between LG and Mandalay.
Mandalay will own 100% of the negatives. However, Guber & Co. will not have any gross participation on the pics. Instead, Giustra said, LG can choose to pay the execs their compensation in Lions Gate shares; or, the execs can opt to take their payments in shares.
“That way, we ensure that our interests are aligned,” said Giustra. “It’s a two-way street.”
According to LG, Mandalay’s 20-pic production slate will have a total value of about $800 million. That figure is based on producing 20 pictures with an average budget of $40 million, Lions Gate execs said.
Mandalay’s foreign deals are currently handled by Patrick Wachsberger’s Summit Entertainment. Strauss, who will over see the entire operation on behalf of LG and Lions Gate, is expected to have some sort of input into the foreign arena.
Staffing will remain in place for Mandalay with the production team being headed up by Todd Black, prexy of production. He will be joined, however, by Strauss in developing and producing material.
(Andrew Hindes contributed to this report.)