Lions GateEntertainment has agreed to buy Artisan Entertainment for $160m plus assumptionof Artisan debt believed to be up to $85m, bringing to an end an auctionprocess that has lasted five months.

The deal - whichis subject to anti-trust regulatory approval and is expected to be completed bythe end of the year - offers Artisan shareholders including majority investorAudax Group and Canada's Bell Globemedia contingent payments based on howwell the merged company performs.

Artisan made itsname through the phenomenal success of The Blair Witch Project in 1999, a performance spike it hasnever been able to repeat.

However its covetedlibrary, which includes Terminator 2: Judgment Day, Dirty Dancing and It's A Wonderful Life, is a treasured asset that will takepride of place in Lions Gate's expanded empire and new library totalingmore than 8,000 titles.

Job casualtiesare naturally expected in the merger of the two companies which overlaps inareas of acquisitions, production and domestic releasing.

"LionsGate and Artisan have complementary strengths and are a superb strategicfit," Lions Gate chief executive officer Jon Feltheimer said in astatement.

"Together, the combined entity will be a powerfulforce in all aspects of filmed entertainment production and distribution andwill benefit from the largest library in the history of independententertainment.

"Amir[Malin, Artisan chief executive officer] and his team have built a greatcompany with a healthy balance sheet and a strong presence in motion pictures,home entertainment and family entertainment, providing us with greatopportunities for achieving economies of scale and extending our brand equity.

"I can think of no company that better complementsour core business strengths and strategic vision than Lions Gate," Malinsaid. "We anticipate fiscal 2003 (ending December 31, 2003) to be thecompany's strongest year to date from a financial perspective.

"We enter2004 with our strongest theatrical slate ever with franchise properties like DirtyDancing: Havana Nights(co-produced with Miramax Films) and Marvel's incredible comic booklegend The Punisher.Under Jon's leadership, I am confident that the new entity will be evengreater than the sum of its parts."

Lions Gate'srecent releases have included Cabin Fever, Confidence and House Of 1,000 Corpses with Academy Award contenders ShatteredGlass, The Cooler and TheGirl With A Pearl Earringwaiting in the wings.

Artisan haslined up Dirty Dancing: Havana Nights, the black comedy Eulogy and Marvel adaptation The Punisher for 2004.

MarvelEnterprises, Miramax Films and a team led by ex-USA Films Chairman Scott Greensteinand buyout firm Thomas H Lee Co were among potential buyers who courted Artisanover the last five months.

The investmentbank J P Morgan provided merger and acquisition advisory services to Lions Gateon the transaction and Allen & Company and Harris Williams & Companyadvised Artisan.

The law firms ofSheppard, Mullin, Richter & Hampton and Heenan Blaikie (Toronto) advisedLions Gate on the deal and the Chicago office of Kirkland & Elliscounselled Artisan.