The company, which will be called Summit Entertainment LLC, has acquired Wachsberger's Summit Entertainment LP and will now handle its own domestic distribution as well as international sales for all its product, while continuing to represent third-party product from existing clients like Walden Media and Alcon Entertainment.
Friedman and Wachsberger will be co-chairmen of Summit, with Friedman as CEO and Wachsberger as president and CEO of Summit International. Bob Hayward will be chief operating officer, David Garrett is named president of Summit International and Erik Feig is president of production and acquisitions. Ron Hohauser is named chief financial officer.
The company is headquartered in Los Angeles with a smaller office in New York and a London office where Garrett is based.
Summit plans to release 10 to 12 films annually, and Friedman and Wachsberger are in the process of building the domestic distribution organization which willl handle all aspects of marketing and distribution for a planned schedule of eight productions a year and four films acquired for domestic as well as limited territories.
Meanwhile Summit International has already closed an output deal for its own productions with SND/M6 in France. The deal is described as a strategic relationship which includes a multi-year output arrangement for Summit-produced product, although Wachsberger stressed that third-party product is still available to all distributors.
'Our budgets will hit the sweet spot between $15m and $60m,' said Wachsberger yesterday, 'although we could go higher.'
'A lot of the new domestic distributors are focusing on the $30m and under space and are genre-specific,' said Friedman. 'We are going to produce studio-level product that is not genre-specific. We will be a significant alternative to the studios and, unlike MGM which distributes other people's product, we will handle our own product. I like to think there is room for everybody.'
The new Summit operation will be in Cannes in force and the partners were clear that they have access to the funds immediately following the final closure of the financing deal late on Wednesday night.
The deal has taken 13 months to put together. Friedman explained that when he was preparing to leave Paramount in late 2005, he sensed an opportunity to create a new domestic distribution organization. 'That was before MGM was back in business, DreamWorks was going to be acquired and I knew that there were cutbacks afoot in production at the studios,' he said.
'The studios were working to put their eggs into the tentpole basket and the mid-range environment was being underserved. But rather than just create a production entity, I wanted to be in distribution. I have always said, The guys that collect distribution fees are the guys that live and everyone else just passes through.'
Friedman already had an existing relationship with Merrill Lynch through Paramount's Melrose Partners slate financing deal and first approached them in Oct 2005. 'Foreign sales was always a big part of the plan, but when I went to Merrill Lynch, I just penciled in that I would hire a foreign sales person.'
Friedman and Wachsberger had known each other for many years, and, bearing in mind Wachsberger's pre-eminence in the international sales field, Friedman approached Wachsberger to discuss the sales element of his planned new venture. The two met in LA just before Berlin 2006.
'Half an hour into the conversation, we looked at each other and realized that here was an opportunity to do something together,' said Wachsberger. 'It was the first time that there was something being said which excited me. We have have been approached by so many people in the last few years from the German days on but nothing gelled.'
Having decided to work together, Friedman and Wachsberger went back to Merriil Lynch with the idea that the new company would acquire Summit as part of the overall structure.
Friedman says that domestic distribution is the key to the new model. Merrill Lynch's Michael Blum, the managing director and head of global structured finance & investments, agreed in a statement.
'Domestic distribution is one of the keys to long-term success in the motion picture business,' said Blum. 'We are pleased to have had the opportunity to combine Summit's existing international distribution and production platform with a state-of-the-art domestic distribution and production company which attracted both financial and strategic investment dollars. This was made possible by Summit's success to date, the vision and capabilities of Rob, Patrick and the rest of the management team and through the innovative capital structure we created which provides funding for production, prints and advertising, foreign sales and library monetization.'
Friedman added that the combined talent relationships of the new Summit should 'distinguish the company with its own identity in the film community.'
As for domestic pay-TV companies and their increasing reluctance to engage in longterm relationships with suppliers, Friedman was sanguine. 'The changing landscape in pay-TV has been built into the business plan,' he said. 'Universal has just done another major output deal with HBO, so there is still an appetite there.'
Wachsberger, meanwhile, says that he doesn't necessarily envisage a slew of international output deals as in France. 'As we start generating our own product, we are going to look at all the possibilities,' he said. 'We will see what makes sense for us. Our financing doesn't depend on it.'
Meanwhile Friedman and Wachsberger said that their first film would be released in North America in the third quarter of this year, but said that they could not yet reveal what it would be. 'There will be subsequent announcements on staff hires and projects,' said Friedman.
The Summit deal with SND/M6 was negotiated by CEO Thierry Desmichelle and head of acquisitions Lional Uzan on behalf of SND/M6.
Merrill Lynch played a lead role in structuring the transaction and served as the placement agent and the transaction advisor to Summit Entertainment with a team led by Robert Stanley, Patrick Lampe and Josh Green. The legal team of Joshua Grode and Bertha Willner of Liner Yankelevitz represented Summit Entertainment and were instrumental in the negotiation and structuring of the financing and acquisition transactions. Gary Stern and Sam Gandhi of Sidley Austin represented Merrill Lynch. Schuyler Moore of Stroock & Stroock & Lavan LLP represented the existing Summit shareholders.