Lionsgate Acquires Summit
Recently, Lions Gate Entertainment Corp. (NYSE:LGF - News), a leading global entertainment company, announced the acquisition of Summit Entertainment, the maker of ‘Twilight’ series for $412.5 million.
The company is constantly seeking strategic acquisitions and alliances to enhance its competitive position, maximize return and build a diversified portfolio for future growth. The string includes companies like Artisan, Debmar-Mercury, Trimark, Redbus, TV Guide Network and Mandate.
Lions Gate appointed JP Morgan, a unit of JPMorgan Chase & Co. (NYSE:JPM - News), Barclays Capital, a unit of Barclays PLC (NYSE:BCS - News), and Jefferies as financial advisors for the process.
Money Factor
Lions Gate stated that the cash on Summit’s books were used to fund major portion of the deal and the remaining was paid through its own cash reserves ($55 million) and issue of debt and stock ($45 million through debt offerings and $50 million through stocks). Further, additional $20 million will be due in cash or stock within 60 days.
Moreover, Summit's existing term loan was refinanced through $500 million debt facility backed by Summit’s assets. The company expects to generate significant amount of cash flows from the business which will facilitate the company to repay the loan before its maturity in 2016.
Deal Brings Value
Lions Gate’s crown jewel is its library of approximately 13,000 motion picture titles, television episodes and programs, and the move further expands its filmed entertainment library while boosting its feature film and home entertainment offerings.
Further, the company added that the company’s production and distribution capacity will be supplemented with the integration of Summit's film operations. In addition, it will also facilitate Lions Gate to emerge as a leading international sales group by broadening its global reach.
Moreover, the acquisition will bring in noteworthy monetary benefits for the company including Summit’s rich cash flow and revenue.
The company added that the buyout strengthens Lions Gate's position and is expected to be notably accretive to its earnings in fiscal 2013.
Founded in 1986 and headquartered in Vancouver, Canada, Lions Gate is a film studio, producing and distributing motion pictures for theatrical and straight-to-video release, and television programming for the cable and broadcast networks.
To grab its share of box office receipts, Lions Gate competes with other major studios, such as Fox Entertainment Group, Paramount Motion Pictures Group and Time Warner Inc. (NYSE:TWX - News).
Currently, Lions Gate retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the company’s fundamentals, we have a long-term 'Neutral' recommendation on its shares.
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