M&A

Filmmaker Lions Gate to Buy Starz for $4.4B

The offer represents a total value of $32.73 per share to Starz shareholders, an 18% premium, says Lions Gate.
Katie Kuehner-HebertJune 30, 2016

Hunger Games’ filmmaker Lions Gate on Thursday said it would buy Starz, an integrated media and entertainment company based in Englewood, Colo., for $4.4 billion in a cash-and-stock deal.

The deal would “significantly increase” Santa Monica, Calif.-based Lions Gate’s content creation capabilities, enhance its position in premium scripted programming, and expand its global distribution footprint across mobile, broadband, cable, and satellite platforms, the company said.

The combined company would encompass a 16,000-title film and television library; an independent television business; a feature film business that has generated more than $7 billion at the global box office over the past four years; and operation of or investment in 30 channel platforms around the world.

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“The combination of Lions Gate 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,” Lions Gate’s chairman Mark H. Rachesky said in a press release.

Under the terms of the deal, each share of Lions Gate common stock would be reclassified into 0.5 voting and 0.5 newly created non-voting shares. Holders of each share of Starz Series A common stock would receive $18 in cash as well as 0.6784 of a share of Lions Gate non-voting stock based on a fixed exchange ratio.

Based on Lions Gate’s 20-trading day volume weighted average price as of Tuesday, the offer represents a total value of $32.73 per share to Starz shareholders, an 18% premium to Starz’s 20-trading day volume weighted average price as of the same date. Holders of each share of Starz Series B common stock would receive $7.26 in cash and 0.6321 of a share of Lions Gate voting stock and 0.6321 of a share of Lions Gate non-voting stock.

Lions Gate 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 at year-end. The company will have the ability to “rapidly delever,” LionsGate said.

Shares of Lions Gate were up 1.2% to $21.19 in trading on Thursday, while Starz shares were up nearly 10% to $31.01.

The deal “would unite two media companies with ties to cable mogul John Malone,” Reuters wrote. Lions Gate and Malone own shares in Starz, while Malone is also a Lions Gate shareholder who sits on its board.

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