Lionsgate Will Spin Off From Starz In Deal Valuing Business At $4.6 Billion

Topline

Lionsgate—the movie studio behind “The Hunger Games,” “John Wick” and other franchise hits—announced Friday it will merge with a special-purpose acquisition company in a long-anticipated deal that separates it from Starz TV and values the studio at $4.6 billion.

Key Facts

Lionsgate on Friday announced its studio business, content library and talent management and production company will be combined with SPAC Screaming Eagle Acquisition Corp. to create Lionsgate Studios, which will not include the STARZ platform and will establish Lionsgate Studios as a separate publicly traded entity.

The existing Lionsgate company will hold on to Starz and still hold 87.3% of Lionsgate Studios shares, with 12.7% owned by founders, shareholders and investors of Screaming Eagle, chaired by former Hollywood executive Harry Sloan.

The transaction is expected to raise approximately $350 million for Lionsgate, including $175 million in alread-pcommitted PIPE (private investment in public equity) financing.

The deal is still subject to regulatory and shareholder approval and is expected to close in the spring of 2024.

A deal to separate Starz and the studio was long-expected: Lionsgate confirmed in February it would move forward with the spin-off of its studio business and has been exploring alternatives for Starz, which it acquired for $4.4 billion in 2016, since as far back as 2019.

Executives have worried the combined company is undervalued and Starz—a premium cable channel and streaming service—was hurting the company’s market value, Bloomberg and Axios reported, and the move comes a month after Starz announced it would lay off 10% of its employees.

Lionsgate has also struggled with debt this year—credit rating agency Fitch cut the company’s debt rating to “negative,” from “stable” in January, citing concerns over its use of production loans to create content that then wasn’t released during the pandemic.

Key Background

Lionsgate was founded in Canada in 1997 and went public by merging with Toronto Stock Exchange-listed Beringer Gold Corp. The company broke into the entertainment industry by buying up small production and distribution businesses before launching its first films in the Latino market. In 2012 it acquired Summit Entertainment, which produced and distributed the “Twilight” films, and that year the success of “The Twilight Saga: Breaking Dawn – Part 2” and “The Hunger Games” franchise pushed it over the $1 billion mark at the North American box office for the first time. Lionsgate now distributes CBS Films, owns half of Pilgrim Studios and an acquisition of eOne from Hasbro—which will give it titles like “The Rookie” and the “Naked and Afraid” franchiches — is expected to close next week.

Big Number

$471 million. That’s how much Lionsgate’s five most successful films—”John Wick: Chapter 4,” The Hunger Games: The Ballad of Songbirds & Snakes,” “Saw X,” “Jesus Revolution” and “Plane”—made at the box office this year. The studio was also behind some of the best-reviewed films of the year, including “Are You There God? It’s Me, Margaret” and “Joy Ride.”

Tangent

Lionsgate Studios is just the latest to be facilitated by Harry Sloan and Jeff Sagansky, the director of Screaming Eagle. The pair also struck SPAC deals with sports-betting site DraftKings and launched mobile-game tech maker Skillz, which allows players to compete in games like Solitaire Cube and Bubble Shooter. Spinning Eagle is the eighth blank-check company formed by Sagansky and Sloan.

Further Reading

MORE FROM FORBESJill Martin Makes Major Merchandise Deal With Lionsgate Amid Trying Health JourneyMORE FROM FORBESAziz Ansari To Make Directorial Debut With Lionsgate, Seth Rogen And Keanu Reeves

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