Lionsgate Shares Jump on Possible Wanda Deal

Hunger Games Mockingjay Part 1 -
Courtesy of Lionsgate

Shares of Lionsgate jumped 3% following a report that Wanda Group wants to own a controlling stake in the company.

The stock gained $1.02 to $34.92 on the New York Stock Exchange on Monday. During the session, the shares were up over 5% to $35.69 before falling back.

Wanda’s chairman, Wang Jianlin, made the disclosure to Bloomberg about the possible Lionsgate investment. Jianlin  also said Wanda has had talks about investing in Metro-Goldwyn-Mayer and that he wants to buy unnamed European distributors as part of a plan to control 20% of the global cinema market by 2020.

Spokespeople for Lionsgate and MGM did not immediately respond to requests for comment.

The report said Wanda wants only to purchase a majority share in Lionsgate and that the talks are in the early stages.

“China’s movie industry is booming at unprecedented speed,” Jianlin told Bloomberg. “Buying a well-known U.S. company will help our distribution overseas.”

With Monday’s gain, the stock has recouped its losses from Nov. 21, when it fell 5% in the wake of disappointing opening day grosses for “The Hunger Games: Mockingjay — Part 1.” The film has grossed $225.6 million domestically and $254.4 million internationally in its first dozen days, but that’s short of the top end of projections.

Analyst Tuna Amobi of Standard and Poors told Variety that he’s not surprised by Wanda’s interest in the wake of recent speculation that Chinese Internet giant Alibaba and CBS Corp. were separately considering an investment in Lionsgate. More possible bids may emerge, he added.

“There are a lot of foreign investors sitting on the sidelines,” Amobi said. “I don’t think that the situation is quite at the point where Lionsgate would be forced to declare an auction.”

Matthew Harrigan of Wunderlich Securities said Wanda’s interest is more likely to lead to a concrete offer than that of Alibaba because of its existing investments in entertainment, which included a $2.6 billion deal in 2012 deal to buy the AMC movie chain.

“Strategically, I think the Wanda deal offers more opportunity,” he added. “Wanda certainly has a higher entertainment component than Alibaba and seemingly firmer intentions to make an investment.”

Alibaba is reportedly interested in acquiring Lionsgate co-chairman Mark Rachesky’s 37.4% stake in the studio. Rachesky met in October with Wanda’s Jianlin in China, according to the Bloomberg report.

Wanda recently spent $1.2 billion to buy a Wilshire Boulevard site that will serve as the hub for its entertainment investments.

“The best deal is with someone who is relatively passive on creative involvement and can afford better access in Asia,” Harrigan said “And that certainly describes Wanda.”

Marla Backer, an analyst with Ascendiant Capital Markets, noted that Lionsgate presents potential investors with a unique opportunity.

“Content is very important right now as new emerging platforms proliferate,” she noted. “DreamWorks Animation and Lionsgate are the only pure play studios available of a certain size, so it doesn’t surprise me that someone would be interested.”

Brent Lang contributed to this report.

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