Who Wins and Loses as Lionsgate Buys Summit

Lionsgate Logo Key Art 2011

THE REPORT: Analysts predict the moneymaking "Twilight" franchise will pay back what the studio will spend on the acquisition.

Bella Swan, meet Katniss Everdeen.

Summit Entertainment, the studio behind the blockbuster Twilight franchise, is about to be gobbled up by Lionsgate, which hopes to replicate Twilight-mania with the March release of The Hunger Games.

After months of negotiations, the mini-majors have agreed to a sale price of $350 million cash, plus $50 million in stock and the assumption of about $300 million in debt. The deal should give Lionsgate, which has a successful television business (Mad Men, Weeds) but has struggled recently at the box office, greater creative clout in Hollywood and increased leverage with exhibitors. And at least for now, analysts seem to like the idea of a combined company.

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"We see the deal as a leveraged buyout with solid cash flow visibility for the next few years, because of Twilight," writes analyst Ben Mogil, who predicts the four Twilight films — the final installment, Breaking Dawn Part 2, hits theaters in November — will generate at least $1.4 billion in revenue by 2017, more than paying back what Lionsgate will spend on the Summit acquisition.

That would be a welcome boost for Lionsgate and CEO Jon Feltheimer, who reported a loss of $24.6 million in the quarter ended Sept. 30 on sales of $358 million — in part because film revenue dropped 36 percent due to such disappointments as Conan the Barbarian and Taylor Lautner's Abduction.

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The most immediate beneficiaries of the deal will be Summit's investors, who will reap their second payday in a year. In March, Summit refinanced with a new $550 million loan and a $200 million credit line, allowing them to use Twilight cash to pay back investors, including Rizvi Traverse, Participant Media and top executives Rob Friedman and Patrick Wachsberger.

Friedman and Wachsberger are expected to head the combined company's film group, helping shepherd four planned Hunger Games movies starring Jennifer Lawrence based on the best-selling trilogy by Suzanne Collins. And Wachsberger, one of the industry's top experts in international sales, should help bolster the company's bottom line.

Layoffs are expected, and the future of the Lionsgate film team headed by Joe Drake seems uncertain. But the deal should leave the publicly traded company stronger, more diversified and better able to fend off corporate raiders like Carl Icahn.