Lionsgate to acquire Starz for 4.4 Billion Dollar

News Hour:

Lions Gate Entertainment Corp, the film studio behind the Hunger Games movie franchise, said it would buy premium television network Starz for $4.4 billion in cash and stock, in a deal that would unite two media companies with ties to cable mogul John Malone.

Lions Gate is a premier next generation content leader, and Starz, a leading integrated media and entertainment company, today announced an agreement under which Lionsgate will acquire Starz for a combination of cash and stock totaling $4.4 billion, creating a global content powerhouse positioned to capitalize on growth opportunities worldwide.

Under the terms of the agreement, each share of Lionsgate common stock will be reclassified into 0.5 voting and 0.5 newly created non-voting shares. Holders of each share of Starz Series A common stock will receive $18.00 in cash as well as 0.6784 of a share of Lionsgate non-voting stock based on a fixed exchange ratio. Based on Lionsgate’s 20-trading day volume weighted average price (“VWAP”), as of June 28, 2016, the offer represents a total value of $32.73 per share to Starz shareholders, an 18% premium to Starz’s 20-trading day VWAP as of the same date. Holders of each share of Starz Series B common stock will receive $7.26 in cash and 0.6321 of a share of Lionsgate voting stock and 0.6321 of a share of Lionsgate non-voting stock.

Chief Executive Officer of Lions Gate Entertainment, Jon Feltheimer claps with actors from the show Mad Men while visiting the New York Stock Exchange in New York

The transaction significantly increases the combined company’s content creation capabilities, enhances its leadership in premium scripted programming and scales its global distribution footprint across mobile, broadband, cable and satellite platforms. It also paves the way for a broad range of new content partnerships and accelerates the growth of Lionsgate and Starz’s own OTT services. In addition, the acquisition is expected to generate significant revenue and cost synergies.

To illustrate the scale of the transaction, the combined company will encompass: a 16,000-title film and television library; the largest independent television business in the world, including 87 original series on 42 U.S. networks; a feature film business that has generated over $7 billion at the global box office over the past four years; operation of or investment in 30 channel platforms around the world, including the flagship STARZ platform reaching 24 million U.S. subscribers, the STARZ ENCORE network with over 32 million subscribers and five OTT services; and a growing presence in location-based entertainment and video games driven by the company’s deep portfolio of brands and franchises.

“The combination of Lionsgate and Starz brings significant scale to our portfolio of content and distribution assets and will enable us to compete successfully in today’s rapidly evolving global entertainment marketplace,” said Dr. Mark H. Rachesky, Lionsgate’s Chairman of the Board. “By bringing together complementary resources, premium quality intellectual property and exceptional management, this strategic transaction positions us extremely well to unlock the underlying value of our content to create substantial lasting value for our shareholders.”

“This transaction unites two companies with strong brands, complementary assets and leading positions within our industry,” said Lionsgate Chief Executive Officer 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. 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.”

Greg Maffei, Chairman of Starz, said, “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. 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.”

“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 Starz Chief Executive Officer Chris Albrecht. “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.”

The agreement has been approved by the boards of directors of Lionsgate and Starz and will be submitted to their respective shareholders for approval as well as to regulatory authorities. The proposed creation of Lionsgate non-voting stock is also subject to shareholder approval. Closing is expected to occur by year-end.

The Company intends to fund the cash portion of the deal with a combination of newly issued bank and bond financing. Pro forma leverage, excluding synergies, is expected to be approximately 5.0x-5.5x as of December 31, 2016, with the ability to rapidly delever given the highly cash generative nature of the combined entity.

LionTree Advisors is serving as exclusive financial advisor and Baker Botts LLP is serving as legal advisor to Starz. LionTree Advisors provided a fairness opinion to the board of directors of Starz. The Raine Group is serving as financial advisor and Weil, Gotshal & Manges LLP is serving as legal advisor to the Special Committee of Starz’s board of directors. The Raine Group also provided a fairness opinion to the Special Committee of Starz’s board of directors.

PJT Partners is serving as lead financial advisor to Lionsgate. Additionally, J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank and Credit Suisse are serving as financial advisors to Lionsgate. Wachtell, Lipton, Rosen & Katz and Dentons are serving as legal advisors to Lionsgate. Financing was provided by J.P. Morgan, Bank of America Merrill Lynch and Deutsche Bank. PJT Partners also provided a fairness opinion to the board of directors of Lionsgate and advised on arranging the transaction financing.

Lionsgate and Starz will hold a conference call at 9:00 A.M. ET/6:00 A.M. PT today, June 30. Interested parties may participate live in the conference call by calling (800) 230-1074 (612-332-0226 outside the U.S. and Canada). A full digital replay will be available from today, June 30, through July 6, by dialing (800) 475-6701 (320- 365-3844 outside the U.S. and Canada) and using access code 397261.

Mridha Shihab Mahmud is a writer, content editor and photojournalist. He works as a staff reporter at News Hour. He is also involved in humanitarian works through a trust called Safety Assistance For Emergencies (SAFE). Mridha also works as film director. His passion is photography. He is the chief respondent person in Mymensingh Film & Photography Society. Besides professional attachment, he loves graphics designing, painting, digital art and social networking.
1 Comment
  • uffca.ca
    5 July 2016 at 8:57 pm -

    ___123___Lionsgate to acquire Starz for 4.4 Billion Dollar___123___