Relativity Media LLC agreed to spin off the film-finance fund it set up for Universal Pictures and hand the operation over to Elliott Management Corp.
Elliott, the New York-based hedge fund, in turn agreed to invest additional capital in Relativity, the film-finance and production company led by Ryan Kavanaugh, according to a statement yesterday from the companies.
The split lets Kavanaugh advance his effort to build a movie production and distribution operation, while Elliott gets control of a film-finance fund it had backed since 2008. Kavanaugh is seeking an investor to buy out Elliott’s minority stake in Relativity, the website The Wrap reported yesterday. Elliott responded by saying it had no plans to sell.
“As our core business of developing, producing and distributing our own product has grown to be competitive in size and scope with the majors, this move allows us to focus our energy on that business,” said Kavanaugh, chief executive officer and majority shareholder of West Hollywood, California-based Relativity.
Relativity, which will continue to fund movies made by Sony Corp., bought the production company Rogue Pictures from Universal in January 2009, and the distribution and marketing arms of Overture Films from Liberty Media Corp. July 2010.
The agreement averts potential conflicts of interest that may arise when closely held Relativity finances a project that competes with a film it’s producing, according to the statement. Relativity and Universal each have projects based on Snow White in the works.
Cindy Gardner, a spokeswoman for Universal, declined to comment. The studio is part of Comcast Corp.-controlled NBC Universal Inc.
Last month, Elliott hired Relativity’s president, Michael Joe, to manage its entertainment investments. A former Universal Pictures executive, he will head Elliott Media Investments and manage the funding slate being spun off.
Relativity has an option to buy out Elliott’s Relativity holding, people with knowledge of the arrangement said yesterday. JPMorgan Chase & Co. is leading a group that aims to purchase the stake for about $700 million, The Wrap reported.