Relativity Media to Close $1B Pre-IPO Funding

May 28, 2015

by Claire Atkinson

SANTA MONICA, CA – June 12, 2013 – Movie producer Ryan Kavanaugh wanted to upend all the rules of Tinseltown when he established Relativity Media 10 years ago.

Now he wants to cure cancer.

The bubbly 39-year-old billionaire threw a benefi t on Wednesday for his latest investment, Pathway Genomics.

At the benefi t, held at Kavanaugh’s Santa Monica, Calif., airport hangar, Ke$ha performed and the movie mogul and former hedge-fund investor mingled with the likes of models Amber Valletta and Alessandra Ambrosio.

Whether it’s charity events, medical investments or models, Kavanaugh has become quite the master of cause marketing.

He’s invested tens of millions of dollars in the privately held San Diego biotech fi rm, one of many non-movie-business companies he’s been pouring his cash into.

Kavanaugh acquired a dog-food company, FreeHand, in 2013 with singer and friend, Michael Bublé, to go along with stakes in Vapor Corp., an e-cigarette fi rm, a digital ad fi rm that greets airport travelers in their native languages with duty-free off ers and Shoutz, a fi rm developing the global lottery business into the mobile era.

Whether in his personal portfolio or at Relativity, diversifi cation is the name of the game for Kavanaugh.

Before and after the Pathway fundraiser, Kavanaugh has been hypnotizing East Coast hedge funds and private-equity fi rms with plans to take his studio public, Hollywood fi nancing sources said.

The studio is working with Jeff eries to close a $1 billion pre-IPO placement early next week, sources told The Post. The placement calls for investors to see a public fl oat of between 20 percent and 30 percent of the company within 12 months.

The IPO will value the fi rm at between $6 billion and $10 billion, sources tell The Post. Kavanaugh, reached Thursday by The Post, declined comment. Though there is no pure publicly held Hollywood entity that lines up like Relativity, LionsGate is a similar beast.

But the obsession of Kavanaugh and others inside Relativity is to diversify the studio enough so that its shares don’t swing wildly on every movie release’s success or disappointment.

Currently, 60 percent of Relativity Media’s revenue comes from theatrical releases, sources said. But selling that mix to Wall Street investors — with its volatile nature — is no easy task.

So Kavanaugh is out to diversify his studio, sources told The Post.

By this time next year, sources familiar with the company said, the movie/non-movie revenue mix will move from 60/40 to closer to 50/50.

One plan to diversify includes a Relativity over-the-top platform — called RelaTV — where it would air its own original movies, TV shows and digital video, The Post has learned.

While the studio recently sold rights to its content to Netfl ix, that deal is non-exclusive.

Movies carrying Ryan Kavanaugh’s producer credit have averaged $47.6 million per release, according to Boxoffi

Those set to benefi t from the IPO are Relativity Media’s current backers, including Ron Burkle’s Yucaipa Cos. and Kavanaugh’s original partner, Paul Singer’s Elliott Management.

Other lesser-known investors include: Jim Breyer, the CEO of Breyer Capital; Colbeck Capital; Softbank; Falcon Investments and China’s biggest bank, ICBC.

Relativity’s IPO won’t be the only one for investors to consider in the coming year.

MGM Studios, which creates the James Bond movies, is expected to go public after fi ling regulatory documents.

And there is also talk of WME/Silver Lake taking a merged WME and IMG Worldwide public in the years to come.

For Kavanaugh, however, Relativity will be just one of a number of chips on the poker table — but it will be his most important.