Lionsgate this week has started the formalities around spinning off its studio from Starz and anticipates filing the deal with the SEC in March, and completing the separation of the businesses by the end of its fiscal second quarter next September, vice chair Michael Burns said Tuesday. The news officially resets the timeline for a deal Wall Street’s been anticipating for the better part of a year.
The transaction is meant to unlock value for the stock.
“When you have two very different businesses, it’s tough to put a blended multiple on that, trying to show shareholders the value of both sides of the business. A separation is the cleanest way to do that,” Burns told the RBC media conference.
Starz CEO Jeff Hirsch said the stand-alone Starz media group would have its own currency, meaning shares that it can use “to get bigger, or become part of something bigger,” and he seemed to have little doubt that one of the two would happen. “Do I believe we can continue to be successful at the size we are?” Yes, he said, “but it’s a tough environment out there.”
Ditto for the studio and its circa 18,000-title library assembled by CEO Jon Feltheimer and Burns over the years, at a time when content assets have been in high demand. Post spin, Lionsgate will be one of the only pure-play, publicly traded content companies after deals including a buying spree by Keven Mayer and Tom Staggs’ Blackstone-backed Candle Media (Hello Sunshine, Moonbug Entertainment, Faraway Road) and LeBron James selling a significant minority of his SpringHill Company stake to Redbird Capital and a group of investors. The deal frenzy has slowed a bit with the volatile stock market and uncertain economy, but the streaming wars are still on and the need for content is as great ever.
Lionsgate initially said last fall it was exploring strategic options that included a potential spinoff of Starz, with a deal to be announced by late summer to close in early spring. That deadline passed and the entity more likely to be spun off became the studio, given investor interest in that business. The company is also committed to reducing debt. Lionsgate always maintained a deal was still on track but had declined to box itself in with a new timeline until today.
The stock has been lingering near its 52-week low, closing up 3% today at $7.78.