Will Ryan Kavanaugh's Relativity Media Split From Financial Backers?

9:11 PM PST 05/31/2011 by Kim Masters
Jason Merritt/Getty Images
Ryan Kavanaugh

Insiders in Hollywood and on Wall Street responded with confusion to reports that the Relativity topper might be on the brink of a split from his deep-pocketed backers, Elliott Associates.

Insiders in Hollywood and on Wall Street responded with confusion to reports Tuesday that Relativity Media topper Ryan Kavanaugh might be on the brink of a split from his deep-pocketed backers, Elliott Associates.

Some believe that having lost money since it became involved with Relativity in 2007, Elliott has been encircling Kavanaugh with its own managers. Relativity declined to comment on reports that Kavanaugh is responding with an attempt to have JP Morgan assist him in buying out Elliott's stake in the company.

New York-based Elliott issued a statement saying only that the investment group "is not shopping, not selling and not doing a single thing."

Still, Elliott appears to be discontented. On May 12, Kavanaugh's chief lieutenant Michael Joe resigned his position to oversee Relativity for Elliott.

And sources speculate that Kavanaugh -- who was taking meetings in Cannes with JP Morgan exec Greg O'Hara -- is now looking to escape his association with Elliott. Sources say Kavanaugh has an option to buy out Elliott and that he and O'Hara may be chumming the waters for other potential investors to finance such a move.

"Kavanaugh can be a very charismatic guy, and I've often thought I wouldn't be surprised if someone comes in [on such a deal]," one Wall Street source said. "But I always thought in terms of a less sophisticated investor than JP Morgan." But this source says O'Hara is "a big, loud personality" who "likes being the center of attention," adding that O'Hara and Kavanaugh seemed to have developed a close relationship.O'Hara declined to comment.

One Hollywood source familiar with Relativity says he assumes that if JP Morgan were to get involved, it would only put in a "relatively small investment recouped by fees" from others who wanted in on the deal.

Kavanaugh has become one of the Hollywood's most talked-about executives in recent years as Relativity has emerged as a financial partner on a wide array of studio films. Through a co-financing deal with Universal, Relativity invested in a slate of films including Land of the Lost, Robin Hood and State of Play. On a brighter note, the company also partnered on Bridesmaids, Hop and Despicable Me. It also has a deal with Sony and has invested in such films as Hancock and The Social Network. The Relativity-backed drama The Fighter, released by Paramount, won Oscars in February for stars Christian Bale and Melissa Leo.

In the past year, Relativity has started to produce and distribute its own films, including the hit thriller Limitless and its upcoming Snow White project -- which has put it into conflict with its partners at Universal, who are working on their own version of the Snow White tale.

Email: Kim.Masters@thr.com

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