Starz could turn into ‘acquisition machine’ after spinoff from Lionsgate

By “free radical”, Malone referred to the following affordable media companies: AMC NetworksCo-owned by Hurst and the Dolan family, or managed by A & E Networks. DisneyLacked a global scale to compete with Disney ComcastNBC Universal for original programming and A-list talent.

These companies can decline independently, but banding together can add weight to your balance sheet and increase programming fees for pay-TV providers.

Malone’s vision didn’t come true. Lionsgate hasn’t gained any new importance since Stars, and its market capitalization has shrunk in recent years. Lions Gate currently has a market capitalization of over $ 2 billion. In 2016, Lionsgate paid Starz $ 4.4 billion. Malone is no longer a shareholder of LionsgateWill sell the remaining shares of his voting rights in 2019.

But even without the influence of Malone, and even in the changing landscape of media and entertainment, Stars may carry a torch of his vision.

In the last 6 years Streaming video It has become the North Star in the media world.Bringing companies together to gain a negotiating advantage over pay TV operators in shipping disputes is anachronistic Millions of Americans cancel cables each year.. Investors consider Lionsgate to be running in a streaming war as well.

That’s Lionsgate’s management and board of directors Determine that spinning off Starz is the best behaviour.. As part of Starz’s spin-off, a small number of shares will be sold, which may help set a market valuation for the new public company. VivendiCanal Plus and private equity fund Apollo Global work with streaming distributors RokuBoth have a preliminary bid for 20% of the shares, according to people familiar with the matter.

Starz and Lionsgate “make great deals separately” Lionsgate Chief Financial Officer Jimmy Barge said earlier this month... “They can pursue their own initiatives. This is an opportunity that may not occur in the merged company.”

People said the deal could be announced as soon as Lionsgate’s next earnings date is August 4. A Starz spokesman declined to comment.

As an initial valuation based on the sale of minority interests, Starz is likely to be fixed somewhere between $ 2 billion and $ 4 billion, asking not to name it because the discussion is private. Said the people. In other words, Starz alone could be rated with a higher market rating than Starz and Lionsgate combined.

Listed Starz needs to grow to compete NetflixDisney, Warner Bros. Discovery, Paramount GlobalNBCUniversal, Apple When Amazon In a streaming war. Even some of those companies may not be large enough on their own.

Starz has 24.5 million global streaming subscribers. Combined with Starz’s premium cable network, which competes with HBO and Showtime, it has 35.8 million subscribers worldwide. For comparison, Netflix has 222 million global subscribers.

Starz tends to focus on female and black viewers, and based on Season 1 of the Sean Penn’s “Slowburn” podcast, the recently released series on Watergate, “Power,” “Outlander,” It has had some success in programs such as “Gaslit”. And Julia Roberts.

“Stars seem to have strong content, but they’re having a hard time getting attention,” JP Morgan analyst Philip Kasik said in a note to customers. “This is in line with our paper that streaming is a large business, and we believe that Starz content should be in the hands of another distributor.”

Lionsgate has been trying to sell Starz for years. It’s pretty close to 2019, almost opening a deal with CBS.Its sale Never crossed the finish line Vice Chairman and Controlling Shareholder Shari Redstone chose to push Viacom with CBS instead.Former CBS CEO Joseph Ianniello was interested in the acquisition of Starz, while integrated Viacom CBS CEO Bob Bakish is now Paramount GlobalDid not share his vision, two people said.

All the major media companies have finally decided not to buy Starz. Purchasing a subscale streaming service that works with traditional pay-TV models is a difficult sale for Wall Street. Investors do not want large media companies to spend their acquisitions on transactions that do not keep pace with future growth.

This allows Starz to take another path to growing rapidly. It is the acquisition or merger of another company itself. Two possible targets are once again. AMC Networks And A & E Networks. The market capitalization of AMC Networks is $ 1.3 billion. An AMC spokesman declined to comment on the possibility of the merger. An A & E spokesperson did not immediately respond to the comment.

Investors may be far more satisfied with the merger of Starz and AMC Networks than large companies choose smaller rivals. Even with a series of deals, Starz won’t be a major player overnight. However, it may give you the size to get a carve out and sale from other major media companies. Over time, Starz could become a media company large enough to pose a competitive threat. Or at least not a retrofit.

Starz CEO Jeff Hirsch An interview with CNBC in 2020 hinted at this possibility..

“You’ll see these big six players, but over time, you’ll be looking at your portfolio of assets and saying,’OK, is this right?'” ” Hirsch said.. “Assets fall out of these big six, and you’ll see them make up the new four or five. SonyMGM, Lions Gate, AMC..John Malone talked About summarizing some of these little points. (MGM Since then, it has been acquired by Amazon.. )

AMC Networks and A & E may not be for sale. But they too find themselves as legacy holdovers, owners of declining cable networks. Starz could act as a kind of “horizontal acquisition machine” to stay viable for the next few years.

If you’ve heard that phrase, it’s Someone was accustomed to it, explaining his intention to invest in the cable company Charter Communications in 2013.

That person Liberty media Chairman John Malone.

See: Liberty Media Chairman John Malone on Stock Markets and Streaming Services