Vancouver, - Lions Gate Entertainment, a big part of Canada's Hollywood North phenomenon, has sold its 45 per cent stake in Mandalay Pictures for $10 million US as a profit-boosting move.
"Mandalay ultimately did not fit into our core business," Lions Gate chief executive Jon Feltheimer said Thursday in a conference call.
"It wasn't contributing to our bottom line -- it was frankly dragging down our bottom line for the last 21/2 years," he said. "We just felt this was the appropriate time to continue to clean up the company."
The buyers are Mandalay principals Peter Guber and Paul Schaeffer, Vancouver-based Lions Gate said in a release before reporting improved quarterly earnings.
U.S.-based Mandalay finances, produces and distributes films worldwide. Guber was an independent producer who produced such films as Rain Man, The Color Purple and Batman, among others.
Earlier films done by Mandalay include Seven Years in Tibet, with Brad Pitt; Sleepy Hollow; and The Fan, with Robert De Niro.
"Mandalay's recent successes include Enemy at the Gates and The Score, and I'm confident that (it) will remain a strong production entity," Feltheimer said.
"However, we have publicly expressed our commitment to focus on our own core businesses and extend the Lions Gate brand. We have developed a strong in-house pipeline of branded feature films with top A-list talent through calendar 2003.
"The Mandalay strategy of larger-budget pictures is no longer part of our business model."
Lions Gate has been focusing on bringing in consistent revenue and profits while continuing to diversify and expand its library of movies and TV shows. As a result, it has avoided big-budget films that can be riskier.
"We do not want to compete with the studios with what they do well," Feltheimer said.
"We don't want to have a home-run mentality. We want to have a consistent business plan with a full set of product that we put through our entire pipeline, which keeps all our buyers ... as terrific customers," and that includes TV stations, specialty channels and international film buyers.
Lions Gate (TSX:LGF) is an independent producer and distributor of movies, home entertainment, TV programming and animation worldwide. It also holds a majority interest in the CinemaNow video-on-demand business.
Lions Gate had previously said it wanted to sell its Mandalay investment, which was made in 1997 before Lions Gate developed a full in-house production capability.
The sale was announced just before Lions Gate posted a second-quarter profit of $312,000 US or one cent a share, up from a year-earlier loss of $765,000 US or two cents a share.
Revenues for the quarter ended Sept. 30 totalled $77.9 million, led by strong contributions from core motion picture, home entertainment and TV businesses. That compared with revenues of $59.7 million a year ago.
For the six-month period, profits totalled $2.1 million or five cents a share, up from a year-earlier loss of $2 million or five cents a share. Revenues were $172.1 million, up from $104.9 million.
With Lions Gate's coming slate of films for 2003, "we have what I believe is our finest slate of pictures ever," Feltheimer said on the conference call.
The list includes: Confidence, starring Dustin Hoffman, Ed Burns, Rachel Weisz and Andy Garcia; and Godsend, a contemporary thriller starring Robert De Niro, Greg Kinnear and Rebecca Romijn-Stamos. Other coming titles include Max, with John Cusak; Wonderland, with Val Kilmer; Shattered Glass, Cabin Fever and House of a Thousand Corpses.
After a recent film sales festival, the company said it has more than $20 million in sales of its movies to buyers.
In its TV division, Feltheimer said it has signed up Britney Spears to be part of at least one animated TV series. Also, it will soon begin another season of The Dead Zone and will have an animated film of Pinocchio.
Lions Gate shares (TSX:LGF) on the Toronto stock market rose 14 cents to $3.29 Cdn in trading Thursday.
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