Lions Gate Entertainment Pays $412.5M for Summit Entertainment

(REUTERS) -- Lions Gate Entertainment Corp said it bought private movie studio Summit Entertainment, producer of the blockbuster Twilight vampire series, for $412.5 million in cash and stock.

With the deal, television and movie producer Lions Gate gains the fifth and final Twilight movie, set for release in November; a stronger presence in international distribution, and 13,000 older film titles such as Oscar winner for Best Picture The Hurt Locker for its film library.

The agreement announced on Friday comes as Lions Gate is preparing for the March release of its first Hunger Games movie, part of a triology aimed at the teen audience that made Twilight a mega-hit. The first four Twilight films have sold nearly $2.5 billion in tickets around the world.

Lions Gate is the studio behind the film Precious and the Saw horror franchise as well as TV shows Mad Men, Nurse Jackie and Weeds. The company was engaged in a years-long battle with activist investor Carl Icahn that ended last August when Icahn dropped his battle for control and sold his shares in the studio.

Summit's chief executive, Rob Friedman, and Co-Chairman Patrick Wachsberger re-launched Summit in 2007 as a full-service movie studio, expanding from its roots as a company primarily devoted to the foreign sales of movies.

Both the Lions Gate and Summit labels are expected to be active in the production and distribution of films, the companies said.

The majority of the purchase price was funded with cash on the balance sheet at Summit, the companies said in a joint statement. But Lions Gate will remain in control of the combined studio with Jon Feltheimer continuing as co-chairman and chief executive officer. Michael Burns will remain vice chairman.

The companies did not say if Summit's Friedman and Wachsberger would stay with the new studio or what their roles would be. In the statement announcing the deal, the pair said the new company's dramatically enlarged media platform will create tremendous opportunities for all of us within the Summit and Lionsgate families.

The complete management lineup will be announced in the coming weeks, a person familiar with the matter said.

The remainder of the deal was funded with $55 million of existing Lions Gate cash, $45 million of cash received from a newly issued series of Lionsgate convertible notes, $50 million of Lionsgate common stock and an additional $20 million of cash or stock to be issued at Lionsgate's option within 60 days.

Summit's existing term loan was refinanced with a $500 million debt facility, secured by Summit assets as collateral. Lions Gate anticipates repaying the loan well before the maturity date (in 2016), due to the significant cash flow the business is expected to generate, the statement said.

The transaction is expected to be significantly accretive in Lionsgate's 2013 fiscal year beginning April 1, 2012, the companies said.

JP Morgan, Barclays Capital and Jefferies served as financial advisers for Lions Gate.

Shares of Lions Gate closed down 1.3 percent at $8.60 on Friday, just ahead of the deal's announcement. There was no change in afterhours trade.