×
You will be redirected back to your article in seconds

Lionsgate to Acquire Starz for $4.4 Billion

Lionsgate has sealed an agreement to acquire premium cabler Starz in a $4.4 billion cash and stock deal.

The deal had been expected. The two companies have flirted with a merger on and off for more than a year. The two were united in a corporate marriage early last year by investor John Malone, the majority shareholder in Starz who also acquired a stake in Lionsgate last year. Malone’s stake in Lionsgate will grow through the Starz acquisition pact as he will receive voting and non-voting Lionsgate shares in exchange for his preferred Starz Class B stock.

Malone’s personal stake in Lionsgate is believed to grow to about 7.5% of voting power in the company with the transaction. In addition the Malone-affiliated Liberty Global and Discovery Communications each hold 3.4% stakes in Lionsgate.

Lionsgate said the deal in total values Starz shares at $32.73, an 18% premium over the 20-day average trading price for Starz as of June 28. Starz shares have been on the rise for the past few months as acquisition rumors heated up.

“This transaction unites two companies with strong brands, complementary assets and leading positions within our industry,” said Lionsgate CEO Jon Feltheimer and vice chairman Michael Burns. “We expect the acquisition to be highly accretive, generate significant synergies and create a whole that is greater than the sum of its parts. (Starz CEO) Chris Albrecht and his team have built a world-class platform and programming leader, and we’re proud to marshal our resources in a deal that accelerates our growth and diversification, generates exciting new strategic content opportunities and creates significant value for our shareholders.”

The deal calls for Starz shareholders to receive $18 in cash and non-voting shares in Lionsgate. The transaction will see Lionsgate shares reclassified into voting and non-voting shares, a structure that is common in Malone-affiliated companies. Malone’s investment in Starz was a personal holding rather than through his Liberty-branded holding companies. However, Liberty Media CEO Greg Maffei serves as chairman of Starz.

“Jon, Michael and the rest of the Lionsgate team have built the first major new Hollywood studio in decades, and we’re thrilled to join with them in a transaction that multiplies the strengths of our respective businesses,” said Albrecht, who earlier this week signed new employment contract that runs through 2020. “Our similar entrepreneurial cultures and shared vision of the future will make this alliance an incredible fit that creates tremendous value for our shareholders, great content for our audiences and limitless opportunities for our newly-combined company. I am very appreciative of the work, passion and dedication of both of our companies’ employees and more enthusiastic than ever about the future of our business.”

Lionsgate said it expects to fund the deal with a combination of loans and bonds. It will raise the studio’s debt leverage to 5 to 5.5 times earnings, although the cash flow provided by Starz will help them whittle down that debt, the company said. The deal is expected to close by year-end.

The big question raised by the deal is how it will affect Lionsgate’s participation in Epix, the premium movie channel it owns with Viacom and MGM. Lionsgate has about a 30% stake in Epix, which has been the pay TV home for its movies since 2009. In the short term, execs said, the Epix partnership will remain intact.

Another potential hurdle on the horizon during the period when the deal closes is a renewal of Starz’s carriage agreement with AT&T’s DirecTV, the single-largest MVPD in the nation. The deal at present is worth an estimated $350 million a year to Starz. If AT&T decides to flex muscle and hammer Starz for concessions, that deal could affect the underlying projections for the merger.

Lionsgate and Starz billed the union as a natural fit of a studio that is increasingly invested in high-end TV content and a premium cable group that has momentum with original programming for the first time since its launch in 1994. Starz’s buzzy dramas at present include “Outlander” and “Power.” Starz has de-emphasized its focus on theatrical movies in the past few years under Albrecht. Sony Pictures is the only studio with which Starz has a movie output deal. That pact runs through 2021.

Starz will give Lionsgate a strong platform to launch series that can be sold around the world. Starz is at the outset of expanding its reach internationally. It also followed the lead of premium rivals HBO and Showtime by launching a standalone broadband-only offering to reach viewers who don’t have a traditional pay TV package.

“Chris Albrecht and his team have grown Starz into an industry leader that provides highly-rated and diverse content, drawing critical claim and brand recognition for Starz,” Maffei said. “Together, Lionsgate and Starz form an entertainment powerhouse with a world-renowned studio that produces blockbuster movies and channels with must-have programming that will be able to capitalize on content opportunities across multiple platforms. The combined company will be well-positioned to return more value to our shareholders and effectively compete in the global media marketplace.”

Starz brings to Lionsgate a collection of 17 Starz- and Encore-branded premium channels. It also owns the Anchor Bay Entertainment home video distribution banner, which has handled Weinstein Co. film releases among other third-party content. Lionsgate’s library of film and TV series will surely offer a boost to the schedules of the Starz and Encore channels, beyond the flagship Starz network.

Touting the scope of the deal, Lionsgate told investors in a conference call Monday that the combined company would invest $1.8 billion annually in new film and TV content. If the deal is completed Starz’s network operations will account for 60% of the enlarged company’s 2016 operating income on a pro forma basis, with Lionsgate film operations delivering 22% and its TV production arm delivering 12%.

LionTree Advisors and Raine Group are serving as financial advisors to Starz in the transaction. PJT Partners is lead advisor to Lionsgate along with J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank and Credit Suisse.

(Pictured: “Outlander”)

More TV

  • Series Mania: De Mensen, Reel One

    Series Mania: First Details on Co-Pro Pitching Project 'Capturing Big Mouth' (EXCLUSIVE)

    LILLE, France — Belgian production company De Mensen, which has just been acquired by France’s Newen, has teamed with Reel One Entertainment on a new cross-continental thriller series, “Capturing Big Mouth. The series will be pitched Monday at this year’s Series Mania Forum Co-pro Pitching section. It chronicles the unlikely rise and eventual fall of [...]

  • Daily Show Viacom

    Viacom, DirecTV Make Progress in Contract Talks, No Blackout After Deadline Passes

    UPDATED: Viacom and DirecTV executives went down to the wire Friday on a combative contract renewal negotiation with high stakes for both sides. The companies stayed in talks past the midnight Eastern contract expiration and the channels stayed up on AT&T’s platforms. Sources indicated early Saturday that the threat of a blackout had been averted. [...]

  • ABBY'S -- "Pilot" Episode 101 --

    TV Review: 'Abby's' Starring Natalie Morales

    “Abby’s,” NBC’s new comedy about a cranky bartender (Natalie Morales) and her inner circle of regulars, is aware of the inevitable “Cheers” comparisons. Created by “New Girl” writer Josh Malmuth and executive produced by uber-producer (and unabashed “Cheers” superfan) Mike Schur, “Abby’s” therefore makes a few key choices in order to differentiate itself as its [...]

  • Ryan Murphy Walk of Fame

    TV News Roundup: Netflix Sets Premiere Date for Ryan Murphy's 'The Politician'

    In today’s roundup, Netflix announces the premiere date for Ryan Murphy’s “The Politician” series, and Kristin Cavallari will host “Paradise Hotel” on Fox.  DATES Reality star Kristin Cavallari will host Fox’s reboot of “Paradise Hotel,” an unscripted dating show in which a group of singles will check into a tropical resort and compete to check [...]

  • 'Selling Sunset': Producer Behind Netflix's First

    'Selling Sunset': Producer Behind Netflix's First Docusoap on the State of Reality TV

    Netflix crossed another unscripted threshold on Friday with the launch of “Selling Sunset,” an 8-episode series that follows a group of real estate agents on the Sunset Strip. The show is believed to be the streaming service’s first docusoap, the now-ubiquitous format first popularized in the early 2000s by shows like MTV’s “Laguna Beach” and [...]

  • Discovery CEO David Zaslav Sees 2018

    Discovery CEO David Zaslav Sees 2018 Compensation Soar to $129.4 Million

    Discovery Inc. president-CEO David Zaslav is once again making headlines for an enormous compensation package. Zaslav’s 2018 compensation soared to $129.44 million in 2018, fueled by stock options and grants awarded as the longtime Discovery chief signed a new employment contract last July that takes him through 2023 at the cable programming group. Zaslav received [...]

  • 'Supernatural' to End After Season 15

    'Supernatural' to End After Season 15 on The CW

    “Supernatural” is ending after 15 seasons. Series stars Jared Padalecki, Jensen Ackles, and Misha Collins made the announcement in a video posted on Instagram on Friday. “We just told the crew that even though we’re very excited to be moving into our 15th season, it will be our last,” Ackles said. “15 years of a [...]

More From Our Brands

Access exclusive content