Lionsgate, Summit inch closer to merger

Summit Entertainment and Lionsgate may be getting closer to a walk down the aisle. Though merger talks could take several more weeks to conclude, the minimajors have been negotiating exclusively with each other in recent days, according to a source with knowledge of the situation. But several sources cautioned that there is still no certainty that an agreement will be reached, given the complexity of the transaction under discussion. The question of leadership has been a key point in the talks. It's understood that if the Lionsgate-Summit deal is consummated, Summit toppers Rob Friedman and Patrick Wachsberger would remain in top-level positions within the merged entity. The companies had no comment Saturday. Miramax owner Colony Capital also had been in talks with Summit in recent weeks. Reps for Colony also had no comment Saturday, as word spread that Lionsgate was closing in on a deal. People familiar with the situation have indicated the bids for Summit are in $350 million to $400 million range plus the assumption of some Summit debt, which remains off its balance sheet. As a public company, Lionsgate would be required to file with the Securities and Exchange Commission once it has signed a letter of intent. The combo of Lionsgate and Summit would unite two sizable minimajors and bring the "Twilight" franchise under the same roof as "The Hunger Games," which Lionsgate is banking on to revitalize its film slate. The last of the "Twilight pics," "The Twilight Saga: Breaking Dawn -- Part 2," due to open Nov. 16, is likely to perform take in as much as $1 billion at the worldwide box office. The first installment of what Lionsgate hopes will be a tentpole franchise, "Hunger Games," based on the popular book series, opens March 23. The trailer for the pic got a promo boost with its target aud in running with Summit's "Twilight Saga: Breaking Dawn -- Part 1," which did boffo business following its Nov. 20 domestic bow. Since 2007, Summit co-chairs Friedman and Wachsberger have transformed Summit from a foreign sales company into a full-service production and distribution studio on the back of its successful gamble on film adaptations of Stephenie Meyer's best-selling series of vampire novels. Summit arranged for a $1 billion financing deal in April 2007 -- a transaction that would not have been possible a few months later as the financial markets began melting down. In March of last year, Summit Entertainment closed a $750 million financing deal -- a $550 million term loan and a $200 million revolving line of credit -- that allowed the company to unshackle itself from itself from some of its debt, increase feature production and run day-to-day operations. It also paid a cash distribution to its largest investors, including Friedman, Wachsberger, Participant Media and private equity fund Rizvi Traverse Management. Lionsgate and Summit have had discussions about uniting going back as far as the fall of 2008, just before the bow of the first "Twilight" pic. The merged entity would have more firepower in a marketplace where the major have scaled back the production of mid-budget films in favor of tentpole and franchise properties -- creating an opportunity for sizable indies to fill that gap. Lionsgate's stock has been up and down in recent years but it appreciated by 28% in 2011. Shares gained in value starting in late August once billionaire financier Carl Icahn agreed in late August to sell off his stake and end his long quest to take control of Lionsgate. Shares closed Friday at $8.41. Unlike Summit, Lionsgate also has a sizable TV production-distribution operation that is home to series include AMC's "Mad Men" and Showtime's "Weeds" and "Nurse Jackie." The company has grown through acquisitions during the past dozen years under the direction of Jon Feltheimer, co-chairman and CEO, and vice chairman Michael Burns. The duo have orchestrated the acquisitions of film/video libraries including Trimark in 2000, Artisan in 2003, Redbus in 2005, the TV syndication outfit Debmar-Mercury in 2006, Mandate in 2007 and TV Guide Network in 2009, as well as a stake in distrib Roadside Attractions in 2007. Despite the ongoing battle with Icahn, Lionsgate remained an active bidder for MGM in 2009 and 2010 before the Lion went through its pre-packaged bankruptcy in late 2010. There's been speculation that Lionsgate has been looking to sell its half-interest in the TV Guide Network cabler. A Summit deal might accelerate a decision on what to do with the flagging asset, as Lionsgate may need to raise some cash to help it absorb the acquisition. Lionsgate has nearly $600 million in debt and over 12,000 titles in its film and TV library. Contact Dave McNary at dave.mcnary@variety.com