UPDATE: Elliott Claims Only “Single Digit” Investment Left In Relativity After Takes Back Kavanaugh’s Film Fund With Universal
RYAN GOES OFF THE RAILS! Kavanaugh Trying To Sell Elliott’s Stake In Relativity When Investment Group Isn’t Selling
EXCLUSIVE: I fear that Ryan Kavanaugh is having a nervous breakdown. I’ve just confirmed with Elliott Associates that their stake in his Relativity Media is not for sale. ”Elliott is not selling. They are not shopping,” the investment group told me exclusively just now as an update their reining in Relativity. Interesting that Ryan today has gone public about buying something that is not for sale. I have learned that Kavanaugh does have a call option where he can buy Elliott’s stake but the investment group would have to agree and it would tack on a sizeable premium making the purchase price “a huge amount of money”, insiders tell me. And no one sane would bankroll him to do that.
Also, I’m told not to believe any of the dollar amounts Kavanaugh is claiming about Elliott’s stake in his company “because they’re off the wall”. Indeed, Kavanaugh himself over the past year has alternately confirmed and denied just to me that Elliott has invested $1.2 billion in Relativity and also a number half that. Which is why trying to speak to Ryan is always such a frustrating experience for myself and the other business press: he rarely tells the truth about anything involving his company. Instead, Kavanaugh today went to the last naive journalist who’ll believe his nonsense (that is, in addition to Variety which just tributed him) and pretended he was taking charge of his company and jettisonning Elliott. ”He doesn’t like that they are taking a more active role and that [former Relativity Media President] Michael Joe is now the Elliott person that works with Relativity,” my insider explains. “Ryan keeps telling Elliott in 20-30 emails that because of what they did he can’t get any business done.”
EXCLUSIVE: This is a huge story everyone in Hollywood and Cannes will be talking about today and this weekend. As an insider just explained to me, Relativity Media President Michael Joe will be brought in-house at Elliott Associates which has long bankrolled Ryan Kavanaugh’s company: ”So somebody who knows the business and knows all the ins and outs of Relativity will be able to manage all of it properly.” It’s known that Elliott Associates — specifically Elliot Management Corporation, a division of the investment group — has poured untold hundreds of millions into Ryan Kavanaugh’s Relativity Media — as recently as $200 million in March — and seen very little return. ”The issue is they haven’t exercised enough control over their investment and now they want to exercise control so that can make these millions work for them,” the insider tells me. This move today clearly means that Elliott has lost confidence in Kavanaugh’s ability to run Relativity independently and has taken away his financial authority. ”It put its foot down and brought Joe in and then said Kavanaugh had to get other executives to manage Relativity besides himself,” the insider says.
UPDATE: I have confirmed that Elliott hiring Michael Joe was that company’s idea and decision. Joe was a much valued EVP at Universal Pictures until Kavanaugh hired him at Relativity. Sources tell me that Michael and Ryan have “been on the outs” recently which also doesn’t bode well for Kavanaugh. However, I have confirmed that it was Kavanaugh’s idea and decision — not Elliott’s – to move up Steve Bertram, who’s currently COO and CFO but from now on will be doing the CFO and President jobs, and bring in reality TV producer Mark Burnett’s COO and General Counsel Brian Edwards as COO of Relativity Media.**
Meanwhile, Relativity keeps expanding its reach after doubling in size and transforming from a production company to a studio. All the while churning press for itself and Kavanaugh — especially recently because the movie side has just made some very big-money bets on big features with big name casts. That’s a lot of risk for Relativity and Elliott together, more than the investor could tolerate.
Today’s move by Elliott also comes after Kavanaugh announced in early March that Relativity Media had closed a new round of financing with its longtime backer for an amount ”in the $100s millions” for producing, financing and marketing films. Elliott, once the most patient of financiers, just got tired of waiting for results.
UPDATE: Relativity Media just issued the news release (below) which spins a different story from the real situation I’ve been told about. This is not just a matter of Relativity Media “reinforcing its executive ranks”:
(Beverly Hills, CA) May 12, 2011 – Relativity Media and Elliott Management Corporation announced today that Relativity’s President Michael Joe will be joining their financial partner Elliott Management Corporation; Steve Bertram, current COO & CFO, will assume the role as President & CFO of Relativity; Brian Edwards, formerly the COO and General Counsel of Mark Burnett Productions, has joined Relativity as COO.
In Joe’s new capacity at Elliott Management Corporation, he will help to manage Elliott’s entertainment assets, specifically, working closely with Relativity to optimize the Elliott-Relativity partnership. Joe will remain in Los Angeles.
Said Joe, “Given my background in the business, this position allows me to leverage all of my resources to help build Relativity’s and Elliott’s partnership. I look forward to continuing to work with Ryan, Steve, Brian and the entire Relativity team.”
Kavanaugh added, “This move, coupled with Bertram and Edwards’ expertise and experience, creates a dynamic platform. Given Relativity’s future plans, and given Steve and Brian’s close involvement with the DreamWorks Animation IPO and their guiding of the sale of DreamWorks LLC to Viacom, there is no better management team I could imagine.”
“Michael has a sterling reputation in the entertainment industry,” said Jesse Cohn, Portfolio Manager at Elliott. “We had identified the need for this role at Elliott, and we are fortunate to fill it with someone with Michael’s credentials, valuable experience at Relativity and Universal, and a close pre-existing working relationship with our team.”
As President & CFO, Bertram will assume supervision of the company’s operations worldwide, while maintaining oversight of banking relationships and corporate finance responsibilities. Bertram will be reporting directly to Kavanaugh.
“Relativity has an exciting future and these changes will strengthen our operation and enable us to continue developing new opportunities,” says Bertram. “Michael Joe has been a great partner to me and I look forward to continuing our work together in his new capacity.”
In addition, Edwards, formerly the COO and General Counsel of Mark Burnett Productions, has been appointed to Relativity’s COO, where he will manage the studio’s business affairs, legal and business administration, while working side by side with Steve Bertram managing day-to-day activities across all divisions.
EXCLUSIVE: I’ve just heard that Ryan Kavanaugh’s Relativity Media has closed a new round of financing with its longtime financial backer, New York-based hedge fund Elliott Associates. The amount is “in the $100s millions” which, according to my source, “is substantial enough to allow Relativity to close pending transactions which ensures that …