Finance

Report: Starz, Lionsgate Close to Deal

Bloomberg says studio could pay more than $30/share for premium channel 6/29/2016 9:27 PM Eastern

After months of dancing around the issue, movie studio Lionsgate could be close to pulling the trigger on a deal to acquire premium channel Starz in a deal that would join two media holdings of cable legend John Malone.

 

According to Bloomberg, Lionsgate could pay more than $30 per share for Starz, or about $4 billion. While the deal could still fall through, Bloomberg said an announcement could come as early as this week.

 

Starz just renewed CEO Chris Albrecht's employment deal, extending it for four years. It is possible that he would stay to run the channel while Lionsgate CEO Jon Feltheimer would be in charge of the studio and its TV production arm in the event of a deal.

 

Lionsgate has been expected to make a play for Starz ever since its largest shareholder, Liberty Media chairman John Malone swapped a 4.5% stake in the channel for a 3.4% interest in the studio. In February, Lionsgate announced that it was interested in starting merger talks with Starz, but those discussions broke off after Lionsgate shares plummeted after a disappointing quarter.

 

In an interview with Multichannel News in April, Albrecht said he was open to a deal, but that it wasn't a necessity.

 

"From my point of view, Starz is an undervalued asset right now because the opportunity far outweighs the risk," Albrecht said in April. "We’re stabilized. We’ve got our product in order. We’ve got a new technology that we think is going to offer us a great opportunity. Now let’s go grow the top line. Now let’s go show people that Starz is an active company with a long and healthy future. And if people want to come in and out of the stock, great. If people are coming in for M&A, maybe there will be a deal tomorrow, maybe there will be a deal three or four years from now. In that period of time, however, we believe in the value of our stock, in the value and strength of our company."

 

According to Bloomberg, the deal would consist mostly of cash and some Lionsgate shares,which were priced at $20.94 on June 29. Starz stock closed at $28.25 per share Wednesday. Both stocks were up substantially in after-hours trading Wednesday, with Lionsgate rising 7.6%to $22.54 and Starz up 9.1% to $30.82 each.

 

While pricing and valuation appears to be the issue holding up a deal, so is a pending carriage renewal with AT&T's DirecTV. A long-term deal would help secure Starz' future.
A Lionsgate spokesman declined to comment on the Bloomberg report. Officials at Starz did not immediately return a request for comment.

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