Smarter people than me around Hollywood are asking an obvious question: why haven’t Lionsgate and Summit merged yet?
The writing on the wall couldn’t be more clear. Lionsgate warned investors Monday of a $50 million loss this quarter from three strikes in a row at the box office, “Conan the Barbarian,” “Warrior” and “Abduction.”
For a small company, that’s a painful blow.
Also read: Lionsgate Telegraphs Big Loss From 'Abduction,' 'Warrior' and 'Conan'
Meanwhile Summit’s new, non-Twilight film, “50/50,” is tracking at a dismal 57 percent total awareness on the eve of its premiere. It’s other non-Twilight films this year — “The Beaver,” “A Better Life,” "Drive Angry" — were huge flops. Only “Source Code” did okay, grossing $123 million worldwide.
This does not bode well for the future.
It’s crushingly obvious that this merger is a deal that needs to happen. The two companies are each too small to thrive in today’s brutal marketplace: fend off corporate raiders, compete with much bigger competitors and weather the vagaries of a cyclical movie business.
On top of which they happen to be located within a block of one other in Santa Monica.
Summit would be wise to make a deal ahead of its two sure hits: "Twilight Saga: Breaking Dawn (Part 1)," opening in November, and "Twilight Saga: Breaking Dawn (Part 2)" — the last in the series — a year after that.
Also read: The Secret Summit Prospectus: $1.2B Projected for 'Breaking Dawn …
As the business model published on TheWrap earlier this year shows, everything else in Summit’s pipeline is a pure crapshoot. The indie has no library to fall back on, and thus no reliable cash flow for any significant length of time.
For its part, Lionsgate has only just recovered from a wearing boardroom battle with corporate raider Carl Icahn. That the company emerged intact from that bullfight was a testament to CEO Jon Feltheimer’s skill maneuvering on Wall Street, but it also exposed the company’s very real vulnerabilities.
Everyone who I trust is saying: bigger would be better.
So what gives? From what I hear, it’s about ego and price. Which means, mainly about ego.
The two companies, Lionsgate led by Feltheimer, and Summit led by CEO Rob Friedman, have been talking merger on and off for a few years, and especially in the past year.
Lionsgate, with a $1 billion market cap, could do an equity swap with Summit, whose finances are private.
One knowledgeable insider suggests that Summit may be worth about $250 million.
Friedman apparently does not agree. And there are those who think he is resisting a move that would require him to have a boss. (Not that I blame him.)
Meanwhile, another insider says that Summit would not consider a deal with Lionsgate as long as the Icahn lawsuits and flame-throwing was going on. That’s now over.
By the way, neither company would comment for this piece. Apparently there are no merger talks ongoing right this moment.
Well, let’s get this party started!
Lionsgate vice-chairman Michael Burns is on the East Coast for a road show this week to sell Icahn’s 22 million shares.
Friedman is in New York for the premiere of “50/50.”
I have an idea: can’t those two guys meet for a drink and make a deal? Say, the bar at the Four Seasons, 9 p.m., tomorrow?
Come on guys — for the good of your investors and shareholders, let's leave the egos out of it and get it done.