Albrecht: Starz Believes in Consolidation

But Says Stock Doesn’t Reflect True Value of Company
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Almost three weeks after movie studio Lionsgate said in a Securities and Exchange Commission filing that it was starting talks with Starz about a possible merger, the premium networks CEO Chris Albrecht said he “believes in consolidation,” but that its recent stock price decline doesn’t reflect the true value of the company.

Lionsgate and Starz have been the focus of rumor speculation for years, especially after Liberty Media chairman John Malone – Starz’ largest individual shareholder – swapped a 3.4% stake in the premium channel for a 4.5% interest in Lionsgate.

On a conference call with analysts to discuss fourth quarter results, Albrecht said Starz is “open minded about the best ways to create shareholder and strategic value for ourselves and any possible business partners. However, we only believe in a potential combination that fully appreciates the value of our business and provides appropriate returns for our shareholders. While we believe the recent stock market volatility has left our stock meaningfully undervalued, the fundamentals of our business have not changed.”

Lionsgate stock has dipped 37% this year (down $12 each) and reported sluggish fiscal Q3 results earlier in the month and Starz shares have slipped about 30% since the beginning of the year from $33.50 to $22.79 Feb. 25 mainly on cord-cutting concerns. That stock slippage has led to a stall in merger talks, according to some reports.

On the call, Albrecht said the channel is close to introducing a standalone app in the coming months that will allow customers who are not subscribers to traditional pay TV outlets to stream some Starz and Encore content online for a fee.  

Starz ended the fourth quarter with 23.6 million subscribers, up by about 300,000 in the period. The premium network also ended the year with 76 episodes of original series, closing in on its long-term goal of 80-to-90 episodes.

Consolidated revenue for the quarter was up 0.5% to $427.6 million and adjusted OIBDA declined 54% to $68 million.