Ron Burkle Buying Elliott Out of Relativity

Ryan Kavanaugh
Todd Oren/Getty Images

Relativity: $40.75 million

The company also pays Universal a distribution fee, in addition to co-financing.

UPDATED: The billionaire investor has agreed to buy Elliott Management's stake in Ryan Kavanaugh's studio.

Ron Burkle, the billionaire who has been looking to expand his entertainment interests, will become the second largest equity owner in Relativity Media after CEO Ryan Kavanaugh with the purchase of most of the interests of Elliott Capital Management, The Hollywood Reporter has confirmed from sources.

Burkle is investing somewhere between $600 million and $800 million for his stake, according to a source, with Elliott retaining a minority interest in Hollywood’s newest movie studio. Some of the money Burkle is investing through his Yucaipa Companies is expected to be used to bolster operations at Relativity, which has a slate of at least half a dozen movies it plans to release this year.

PHOTOS: 9 Highest-Paid Entertainment CEOs

In November, Relativity released Immortals, which has grossed over $180 million worldwide. Its next release is Haywire, opening Jan. 20, followed by Act of Valor on Feb. 17. It’s biggest upcoming movie is Mirror Mirror, based on the Snow White legend, opening in March.

Burkle’s investment in Relativity was first reported by Bloomberg News. Relativity, Burkle and Elliott on Thursday all declined to comment.

Elliott at one time owned half of Relativity and has invested more than $1.1 billion over the past decade. In recent months, however, that relationship has apparently become strained. Elliott, say sources, has been looking for an exit strategy.
Kavanaugh has been seeking a major new investor, and had discussions with a New York investment bank, but nothing came of it.

PHOTOS: Julia Roberts, Lily Collins and the 'Mirror Mirror' Cast

Originally, Elliott, the New York based hedge fund, joined with Kavanaugh to create funds that were used to co-finance movies with major studios. In the past two years, Kavanaugh has moved Relativity into production and distribution while phasing out the financing deals. An agreement to co-finance movies with Universal was taken over by Elliott last year; and a deal with Sony Pictures Entertainment will expire in about a year and not be renewed.

Burkle had reportedly made a loan to Relativity late last year through Colbeck Capital, in which he is a major investor, of $200 million.

Burkle has flirted with the movie business before. In 2010, he worked with Harvey and Bob Weinstein to purchase Miramax from Disney but that deal did not work out. A group led by Colony Capital and Ronald Tutor outbid the Burkle group.

Since then Burkle has also made investments in Weinstein Company movies, usually one or two titles at a time.

Earlier this week Elliott revealed Michael Joe was resigning after less than a year as their person in Los Angeles, where his main job was to oversee the investment in Relativity. At the time it was hinted there was not a lot for him to do. If this report is correct, Joe’s job has essentially become redundant.

It was also revealed Thursday by Billboard that Burkle’s Yucaipa Companies have acquired Artist Group International, a music booking agency with a client list that includes Billy Joel, Metallica, Rod Stewart, Linkin Park, Rush, Def Leppard and Motley Crue.
AGI will now be part of the new Y Entertainment Group, recently created as the music and entertainment vehicle for Yucaipa.

AGI, which is 25 years old, will continue to be led by CEO Dennis Arfa.

Arfa said his entire New York-based staff will also continue together.

Arfa would not divulge the sale price but told Billboard that he was “very happy, and any agent in the music business would be, too.”