This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Hunger Games Not Lions Gate's Only Blockbuster

Stocks in this article: LGF SCHL NFLX

But there are other benefits aside from the revenue generated by Summit Entertainment's movie library and upcoming releases.

Combined, Lions Gate and Summit Entertainment will grow to have a movie-making revenue prowess that will be a rival to Hollywood majors like Warner Bros (TWX), Sony/Columbia (SNE) and Universal. Meanwhile, Lions Gate will benefit from a better ability to distribute movies internationally for a higher fee.

"We expect continued strength in the US box office, as well as more favorable terms with exhibitors now that Lions Gate has acquired Summit to help drive theatrical revenues in future years. In addition, Lions Gate should also enjoy better leverage and profitability downstream as it increases the number of branded films it produces with its larger slate," wrote JPMorgan analyst Monica DiCenso of the acquisition in a Mar. 20 note initiating an "overweight" rating for Lions Gate and an $18 price target.

Summit Entertainment's ability to wrench out international revenue from its Twilight franchise could give Lions Gate upside as it monetizes its three part Hunger Games epic. Because revenue from Summit Entertainment's movies like Breaking Dawn will be used to pay down the loan that came with the acquisition it's still unclear how movie revenues will benefit Lions Gate shareholders.

Management said that earnings tied to Summit Entertainment's films will help Lions Gate pay down its loan in three years, some expect the deal to essentially pay for itself in a quicker fashion. "We expect the term loan to be fully repaid within three years, if not sooner," wrote DiCenso.

The acquisition was Lions Gate's first big move after surviving a multiyear battle with Carl Icahn, which included him sweeping up over 30% of the company's shares and launching =hostile takeover and merger campaigns.

In 2009, Lions Gate tried to buy MGM Studios only to be opposed by its large shareholder Carl Icahn, who also was a big holder of MGM debt. After quashing an early merger attempt, Icahn pushed for a 2010 tie-up as MGM sorted through sale and restructuring options. While talks were underway, Lions Gate sued Icahn and in Nov. 2010, MGM opted for a pre-packaged bankruptcy sale to Spyglass Entertainment.

Lions Gate then turned its focus to Summit Entertainment and rid itself of Icahn. In Aug. 2011, Icahn liquidated most of his over 30% stake in the Lions Gate as part of a settlement. Now the company's largest shareholder is MHR Fund Management, a fund run by a former Icahn partner that may see the company's strategy more favorably. "We believe that MHR is in agreement with the recent strategic decisions by management (shedding non-core assets, Summit acquisition) and does not present the same overhang on shares that Mr. Icahn's involvement in the company did," noted DiCenso of JPMorgan.

Lions Gate will look to have a big 2012 as it taps Twilight and Hunger Games viewers and tries to turn its first post-recession annual profit. Watch for the company's Summit Entertainment acquisition to be paid down quickly as it provides long-term benefits to the movie studio that may help it drive better than expected Hunger Games revenue.

Partnerships with Relativity Media, Roadside Attractions and a co-ownership of pay TV channel Epix are other recent Lions Gate deals that may also help revenue. Those deals bolster Lion's Gate's ability to distribute video on demand movies for Web services like Netflix (NFLX) and cable providers like Comcast (TWX).

For more on Lions Gate Entertainment, see top rated media stocks and why moviegoers are starving for The Hunger Games.

-- Written by Antoine Gara in New York

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs