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'Twilight' studio Summit poised for acquisition by Lions Gate

January 7, 2012 |  7:09 pm

Jennifer Lawrence and Liam Hemsworth in "The Hunger Games."
Lions Gate Entertainment is putting the finishing touches on a deal to acquire rival independent studio Summit Entertainment in a deal worth about $700 million, according to several people with knowledge of the matter who were not authorized to speak publicly.

The agreement, which is expected to be announced within days, would bring together the studio behind "Saw," "Mad Men" and the upcoming "The Hunger Games" with the maker of the hugely successful "Twilight" films. The two companies are headquartered within blocks of each other in Santa Monica.

The consolidation of the studios probably would be bad news for filmmakers in Hollywood, as it would mean one fewer buyer of scripts and source of employment. But the combined company would be a more powerful player as it goes up against larger rivals such as Sony Pictures and Warner Bros. in the increasingly competitive and global entertainment market.

Lions Gate will pay just over $350 million in cash and issue about $50 million in new stock to the owners of Summit, the people said. In addition, Summit will still owe between $200 million and $300 million in debt once it becomes a subsidiary of Lions Gate.

The deal is expected to immediately add to Lions Gate's bottom line, as Summit is currently profitable based primarily on the cash generated by "Twilight" sequels.

The expectation of a deal comes after about two months of heated negotiations that included rival bidder Colony Capital, a private equity firm that is a partial owner of independent film studio Miramax, which Colony wanted to merge with Summit.

One person close to the talks said that Colony, which is controlled by billionaire real estate investor Tom Barrack, made an all-cash deal of the exact same value as Lions Gate's. However, Summit investors preferred taking some Lions Gate's equity, which would give them ownership of about 5% of the combined company.

Earlier this week, Summit entered exclusive talks with Lions Gate, putting Colony on the outs.

However, the people with knowledge said, it's still possible that Colony could come in with a higher offer at the last second, a bid that Summit would have to consider. Barrack is believed to be partnering on the Summit bid with the Qatari Investment Authority, which also owns part of Miramax.

Should the deal close, it would be a victory for Lions Gate Chief Executive Jon Feltheimer and his No. 2, Vice Chairman Michael Burns, who have long eyed Summit and held on-and-off talks to acquire it since 2008. Kristen Stewart and Robert Pattinson star in "The Twilight Saga: Eclipse."

The duo would remain in charge of Lions Gate after the acquisition, while Summit chiefs Rob Friedman and Patrick Wachsberger would take charge of the combined studio's motion picture group. As at Summit, Friedman is expected to focus on production marketing while Wachsberger oversees international business.

It's not yet clear what their roles would mean for Lions Gate's current motion picture group president, Joe Drake. Some people close to both companies have speculated that Drake may leave as a result of the deal.

If Friedman and Wachsberger bring over most of their staff from Summit, as several insiders suggested is likely, that could mean other other film executives and staffers at Lions Gate would lose their jobs as well. Already, people who work at Lions Gate have said there is widespread concern there about how many people might end up unemployed after an acquisition of Summit.

Lions Gate probably won't want to shake up its operations immediately, however, as "The Hunger Games," its biggest movie bet ever, will be released in March. The nearly $100-million production is the first of four planned films based on the bestselling young adult books and has been touted by analysts as the potential source of hundreds of millions of dollars in profits for the company.

The fifth and final "Twilight" movie, meanwhile, will be released in November.

Some details of the talks between Lions Gate and Summit were previously reported by Deadline and Bloomberg.

RELATED:

Lions Gate, Summit homing in on key details for proposed merger

Lions Gate results hurt by weak movie slate

'Hunger Games' could become a game changer for Lionsgate

-- Ben Fritz

Top photo: Jennifer Lawrence and Liam Hemsworth in a scene from "The Hunger Games." Credit: Murray Close / Lionsgate. Bottom photo: Kristen Stewart and Robert Pattinson in "The Twilight Saga: Eclipse." Credit: Kimberley French / Summit Entertainment.

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