John Malone’s Stock-Swap Deal With Lionsgate Closes

Lionsgate and Starz have closed their Feb. 11 stock exchange agreement, placing media mogul John Malone on the studio’s board of directors.

In an 8-K filing with the Securities and Exchange Commission, Lionsgate disclosed that it exchanged 3.43% of its common stock for a portion of Starz’s common stock held by Malone and his affiliates that represents 4.51% of Starz’s common stock and 14.50% of the total voting power of Starz’s common stock.

The federal government has signaled that it has no issues with the deal. The Federal Trade Commission issued a notice of early termination of the Hart-Scott-Rodino antitrust review, meaning that neither it nor the Department of Justice will block the deal.

Investors have been enthused at the prospect that the flirtation could end with wedding bells. Shares of Lionsgate closed on the day of the announcement at $32.42, up 9.2 %, and Starz’s stock rose 3.45% to $31.76. Both stocks have been trading in that range or slightly higher since then.

The stock swap gives Lionsgate access to one of the biggest media consolidation experts. Starz has been on the auction block for the past three years since Liberty Media announced its spinoff. At the same time, Malone has bought stakes in Charter Communications and ITV through his companies Liberty Global and Liberty Media; he also engaged in a failed bid last year for Time Warner Cable.

The Lionsgate deal differs in that it’s one of the rare times that Malone has invested in a content creator, not a distributor.

Despite Wall Street’s ardor, Tuna Amobi, equity analyst at S&P Capital IQ, said recently that he does not expect any imminent moves by Lionsgate and Malone to increase their stakes.

“I would not expect any new development this year,” he added. “The most important thing is that the relationship has been initiated. It’s a small step but it’s very important.”

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