Analysts Support Lions Gate Acquisition of Summit

Lions Gate (NYSE:LGF) made progress over the weekend in its possible acquisition of Summit Entertainment. The Hollywood Reporter said Wall Street analysts like the potential $700 million deal. Summit’s key asset is its ownership over the Twilight Saga, the fourth largest grossing franchise in Hollywood history.

THR quoted Miller Tabak analyst David Joyce who said, “Not knowing the valuation multiples since [privately-held] Summit’s financials are not available, I think it should be a positive for Lionsgate as Summit is proving it can do more than just Twilight.” Joyce continued by saying, “Lionsgate shares dipped last week when it seemed like the deal was not going to happen.”

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THR also cited Alan Gould, an analyst with Evercore Partners (NYSE:EVR) , who also supports the deal. “M&A has been an important element of value creation for Lions Gate. The company acquired Trimark for approximately $50 million in late 2000, Artisan for approximately $375 million in late 2003, which was a major driver of its stock, its U.K. subsidiary in 2005, Debmar Mercury, its TV syndication division in 2006, Mandate Pictures in 2007, and TV Guide Network in 2009. While media investors typically loathe M&A, we have found horizontal acquisitions executed at the right price can be accretive – it is expensive vertical acquisitions that have typically led to shareholder destruction.” Gould also wrote that, “The companies are fairly similar so we assume that a merger also should lead to significant operating and overhead savings.”

Competitors to Watch: DreamWorks Animation SKG, Inc. (NASDAQ:DWA), The Walt Disney Company (NYSE:DIS), Rentrak Corporation (NASDAQ:RENT), Time Warner Inc. (NYSE:TWX), Seven Arts Pictures PLC (NASDAQ:SAPX), CKX Inc. (NASDAQ:CKXE), News Corporation (NASDAQ:NWSA) and Sony Corporation (NYSE:SNE).

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To contact the reporter on this story: Ashley Cloninger at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com