Bloomberg News

Lions Gate Said in Merger Talks With ‘Twilight’ Maker Summit

November 30, 2011

(Updates with closing stock price.)

Nov. 29 (Bloomberg) -- Lions Gate Entertainment Corp., the independent film and TV company, is in merger talks with Summit Entertainment LLC, the studio behind the “Twilight” vampire movies, three people with knowledge of the situation said.

The companies have resumed discussions that broke down in the past over price and control issues, the people said yesterday. They declined to speak publicly because talks are private and there’s no assurance a deal will be reached. Summit has additional suitors, one of the people said.

Lions Gate would gain access to the cash generated by the five “Twilight” movies. The first four films have grossed more than $1 billion in U.S. and Canadian ticket sales for Summit, according to Box Office Mojo. A combination would produce a payday for owners of closely held Summit who formed the studio in 2007 with funding from Merrill Lynch & Co.

Melissa Zukerman, a spokeswoman for Summit, declined to comment, as did Peter Wilkes, a spokesman for Lions Gate.

Summit, based in Santa Monica, California, is scheduled to release the fifth “Twilight” movie in a year. Globally, ‘Twilight’ box office sales total $2.29 billion. The studio is led by co-chairmen Rob Friedman, a former Paramount Pictures executive, and Patrick Wachsberger.

The company raised $750 million this year to finance moviemaking, repay debt and pay a dividend to investors, which include Rizvi Traverse Management LLC.

Lions Gate, also run from Santa Monica, California, has about $550 million in short- and long-term debt, according to Bloomberg data, and has struggled to remain profitable.

‘Hunger Games’

Because of its debt, Lions Gate would likely issue stock to finance a merger, Benjamin Mogil, an analyst at Stifel Nicolaus & Co., said today in a note to investors. Mogil, based in St. Louis, has a “hold” rating on the shares.

The studio, which fought off Carl Icahn this year, produces cable TV’s “Mad Men” series and in March will release “The Hunger Games,” a film based on a young-adult book trilogy that has been compared with the “Twilight” novels. With a production budget of about $80 million, the first film is the most costly ever for Lions Gate.

“The Hunger Games” and three potential sequels may generate $220 million to $733 million in earnings before interest, taxes, depreciation and amortization for Lions Gate over the next several years, according to James Marsh, an analyst at Piper Jaffray & Co. in New York.

Lions Gate, based in Vancouver, fell 1.1 percent to $8.44 at the close in New York trading. The shares have gained 30 percent this year.

Lions Gate tried to buy then-bankrupt Metro-Goldwyn-Mayer Studios Inc. last year, an effort complicated by investor Carl Icahn, one of Lions Gate’s largest shareholders at the time.

Icahn, who had attempted a hostile takeover of Lions Gate, sold his shares in August in a settlement that also ended all litigation between the parties.

--With assistance from Serena Saitto in New York. Editors: Rob Golum, Anthony Palazzo

To contact the reporters on this story: Ronald Grover in Los Angeles at; Michael White in Los Angeles at

To contact the editor responsible for this story: Anthony Palazzo at

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