Revolution recapitalizes; sale called off for now

By Carl DiOrio
The Hollywood Reporter
Jan 17, 2007

Joe Roth's Revolution Studios has completed a $750 million recapitalization designed to let the director-producer complete a slate of six films and allow investors to recoup their money while delaying any need to sell the company.

The move, arranged by the Los Angeles office of the JPMorgan Securities, reflects Roth's belief that the assets eventually will fetch a higher price than might be possible in the current market. The recap comprises several debt components, each with terms of six to 8 1/2 years.

Roth and other Revolution execs control a majority stake in the company, backed by minority equity interests from Starz Encore, Sony and Fox. The equity partners initially contributed $250 million, all of which should be returned to them once JPMorgan completes a secondary round of the recap, JPMorgan Securities managing director Clark Hallren said.

"We anticipate that the investors will have received their initial cash investment back and be cash neutral," Hallren said.

Said JPMorgan Securities managing director John Miller: "So they will have gotten all of their money back and have a continuing interest in the library."

Once the six films in development are released, Revolution will boast a 47-picture catalog. Roth was unavailable to discuss any prospective sale of the library.

It should be noted that Sony's relationship with Revolution is more complicated than with the other investors, as Sony covered hundreds of millions of dollars in P&A costs over the years. Sony thus also participated in the profit and loss of individual movies, and some in Hollywood question whether its relationship with Revolution was worth Sony's sum investment.

Still, the mini-major provided as much as a third of Sony's release slate over the course of the relationship. So at a minimum, Revolution helped fill the content-hungry studio's hefty release pipeline.

As for the Revolution films yet to be released, none are considered particularly high-budget or high-risk. They include Halle Berry-Bruce Willis starrer "Perfect Stranger," the Beatles musical "Across the Universe," kids fantasy "The Water Horse" and the Ice Cube sequel "Are We Done Yet?" all at Sony Pictures; the Bob Odenkirk comedy "The Brothers Solomon" at Screen Gems; and the Nicolas Cage-Julianne Moore starrer "Next" at Paramount Pictures.

When launched in 2000, Revolution was considered a groundbreaking new model for other high-powered film producers to follow.

Roth deferred the usual producer fees on individual pictures and took only a relatively modest executive salary. But the backing he got for production, distribution and marketing from his partners gave life to a company valued at $1 billion before it had committed a single image to celluloid.

Meanwhile, the company's equity backers collectively represented only a 25% interest, with Roth's stake at 60% and other execs sharing in the balance.

High points of Revolution's Hollywood run include the critically praised war film "Black Hawk Down," boxoffice hits like the Adam Sandler-Jack Nicholson comedy "Anger Management" and the creation of young-skewing spy franchise "XXX." The much-derided "Gigli" numbered among the low points.
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