Pact to cover up to five movies a year

Ryan Kavanaugh's Relativity Media has reached a multi-year output deal with Lionsgate covering up to five movies a year.

The deal, announced Monday, has been rumored for several weeks in the wake of Lionsgate's decision to reduce its annual inhouse production slate (Daily Variety, April 14).

The first title to be released under the pact is "Brothers," directed by Jim Sheridan and starring Tobey Maguire, Jake Gyllenhaal and Natalie Portman in a drama about two brothers in love with the same woman. "Brothers," based on the 2004 film by Danish writer/director Susanne Bier, is expected to be released by Lionsgate later this year.

The next two pics covered by the pact will be supernatural thriller "Season of the Witch" and the action/comedy "The Spy Next Door," both in postproduction.

"Witch" is directed by Dominic Sena and stars Nicolas Cage, Ron Perlman and Claire Foy in the story of 14th Century knights transporting a girl suspected of being the witch who has spread the Black Plague. Project marks Relativitys first film in its output arrangement with Charles Roven's Atlas Entertainment.

"Spy," directed by Brian Levant, stars Jackie Chan as a mild-mannered suburbanite who agrees to babysit his neighbors unruly kids, only to have them accidentally blow his cover as a secret agent.

The companies noted Monday that they've already partnered over the past two years on "The Forbidden Kingdom," "3:10 to Yuma" and "The Bank Job."

Under terms of the pact, Kavanaugh will put up all P&A and production costs for the Relativity pics. Lionsgate is already in business with Kavanaugh via its Mandate International unit, which sells Kavanaugh's films in foreign territories.

Lionsgate motion picture group president Joe Drake and Relativity CEO Ryan Kavanaugh jointly announced the deal on Monday.

This deal represents a big step in the evolution of a partnership between two forward-thinking companies," Kavanaugh said. " Lionsgate is defined by its keen ability to take smart risks on compelling films."

Drake said, "Ryan Kavanaugh and his colleagues at Relativity Media have built an extraordinary company that is one of the industry's most prolific suppliers of broad-appeal, talent-driven motion pictures."

For Relativity, the deal provides a dedicated domestic distributor for its product amid a crowded market -- and a partner in Lionsgate that has scored success with genre films such as the "Saw" series and the Tyler Perry comedies.

Relativity received a $1 billion infusion in September from New York-based hedge fund Elliott Associates, leaving the production and finance shingle with more than $2 billion on its balance sheet. It then bought 4-year-old Rogue Pictures, a genre division that specializes in scary fare, for what some dub a bargain price of $150 million -- and reupped its commitment to co-finance the majority of Universal's slate through 2015.

In addition to structuring nearly $5 billion in film financing deals for Sony and U, Relativity's also expanding its single picture business, with plans to make eight to 10 films per year.

For Lionsgate, the deal comes at a time when it's been under pressure to reduce its annual operating costs, currently estimated at about $120 million, from activist shareholder Carl Icahn. The billionaire is its third-largest shareholder with 14.5% and has made an offer for $325 million of Lionsgate debt but the offer -- extended once and due to expire Friday -- has generated little interest thus far.

Lionsgate's most recent successes have come from "Tyler Perry's Madea Goes to Jail," which topped $90 million domestically, and "The Haunting in Connecticut" with $54 million in a month. Its "Crank: High Voltage" has under-performed with $11.5 million in two weeks.