Lions Gate may form partnership to buy MGM

Analysts at Wunderlich Securities maintain their “hold” rating on Lions Gate Entertainment Corp, while reducing their estimates for the company. The target price for LGF is set to $6.

The visibility into LGF’s GAAP and free cash flows has improved for the new release calendar. Lions Gate has been benefiting from lower P&A expenses on some theatrical releases, the analysts say. The company is expecting $150 million of annual profits from its film releases by 2012. LGF is expected to enjoy robust TV revenues during FY10.

Lions Gate is likely to issue a bid to acquire MGM. The analysts believe that the company may require a partner, such as JPO Morgan’s Equity One Partners or Carl Icahn, in order to make the bid credible. Wunderlich Securities has reduced its EPS estimate for 2010 from $0.03 to -$0.25.

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