Post by The Ultimate Nullifier on Feb 12, 2015 1:09:26 GMT -6
variety.com/2015/film/news/will-the-lionsgate-and-starz-flirtation-end-in-marriage-1201431513/
Shares of Lionsgate and Starz jumped Wednesday in the wake of Lionsgate’s deal with Liberty Media chairman John Malone — signalling that investors are hoping that it’s the start of a beautiful friendship.
The deal gives Lionsgate 14.5% of the voting power in Malone’s Starz in exchange for which Malone gets a 3.43% stake in Lionsgate and a seat on its board, but Wall Street thinks that if the Hollywood studio and the media consolidator like the cut of each other’s gib, the relationship could deepen.
It’s possible that Malone could end up making a play for Lionsgate or the studio behind “The Hunger Games” and “Divergent” could try to take control of Starz, a collection of 13 cable channels.
Both possibilities have been speculated about for some time, although analysts caution that the media companies are still just dating.
“I don’t think anything is imminent,” said Hal Vogel, a media analyst and CEO of Vogel Capital Management. “They have to dance around and get to know each other to figure out if there’s compatibility. Any merger or acquisition would take a year or two.”
Investors are excited at the prospect that the flirtation could end with wedding bells. Shares of Lionsgate closed the day at $32.42, a 9.20% increase, and Starz’s stock rose 3.45% to $31.76. If the stock swap accomplishes nothing else, it gives Lionsgate access to the mind of one of the biggest media consolidation experts alive.
“We are thrilled to have John join our board,” said Lionsgate vice chairman Michael Burns in an interview with CNBC. “We think this is one of the world’s greatest investors and a very big brain in the media world.”
Burns also stressed that the timing for the alliance is particularly positive. “Any of his media holdings are interesting when you have global demand for content skyrocketing,” he added.
Malone is a congenital buyer and seller. Starz has been on the auction block for the past three years since Liberty announced its spinoff. At the same time, Malone has bought stakes in Charter Communications and ITV through his companies Liberty Global and Liberty Media, and engaged in a failed bid last year for Time Warner Cable. The Lionsgate deal is different, however, in that it’s one of the rare times he’s invested in a content creator, not a distributor.
“John Malone is probably the most experienced dealmaker and financial engineer in the media business,” said Vogel. “He’s extremely talented, and he has the money and borrowing power to do a lot of things others can’t. He’s able to steer a course that’s more independent than most other companies because he’s not beholden to shareholders.”
The deal comes at time of consolidation among pay TV providers. Cable giants like Time Warner Cable and Comcast are getting hitched at a furious clip, partly to guard against an uncertain digital future, and partly because the expansion of platforms online and on the smallscreen are driving demand for distinctive programming. There’s virtue in getting bigger.
When it comes to cutting deals for its shows and movies, Burns said Lionsgate will not be hindered by its one-third ownership of pay-cable provider Epix, on which it’s partnered with MGM and Paramount.
“We will sell our content to anyone,” he added.
A play for Starz makes sense for Lionsgate, which is winding down its “Hunger Games” franchise, has concluded its “Twilight” series and wraps up its Emmy-winning “Mad Men” this year. The steady subscription revenue that a cable operator generates would provide steady income while the studio searches for its next hit film series or watercooler show.
In a Wednesday report titled “Dating Before the Engagement?,” RBC Capital Markets analyst David Bank reaffirmed his “outperform” rating on Lionsgate and raised his price target to $39.
“The [Starz] deal could drive incremental TV business with the possibility of a transformative acquisition in the future,” he wrote.
He said the deal should help Lionsgate deepen its content relationship with Starz and give it opportunities to develop content relationships with other Malone-affiliated companies.
“While there are several potential outcomes, we think [Lionsgate] eventually acquiring [Starz] is the most likely one,” he added.
Given the sharp rise in both companies’ share prices, that outcome is what many investors are banking on.
Shares of Lionsgate and Starz jumped Wednesday in the wake of Lionsgate’s deal with Liberty Media chairman John Malone — signalling that investors are hoping that it’s the start of a beautiful friendship.
The deal gives Lionsgate 14.5% of the voting power in Malone’s Starz in exchange for which Malone gets a 3.43% stake in Lionsgate and a seat on its board, but Wall Street thinks that if the Hollywood studio and the media consolidator like the cut of each other’s gib, the relationship could deepen.
It’s possible that Malone could end up making a play for Lionsgate or the studio behind “The Hunger Games” and “Divergent” could try to take control of Starz, a collection of 13 cable channels.
Both possibilities have been speculated about for some time, although analysts caution that the media companies are still just dating.
“I don’t think anything is imminent,” said Hal Vogel, a media analyst and CEO of Vogel Capital Management. “They have to dance around and get to know each other to figure out if there’s compatibility. Any merger or acquisition would take a year or two.”
Investors are excited at the prospect that the flirtation could end with wedding bells. Shares of Lionsgate closed the day at $32.42, a 9.20% increase, and Starz’s stock rose 3.45% to $31.76. If the stock swap accomplishes nothing else, it gives Lionsgate access to the mind of one of the biggest media consolidation experts alive.
“We are thrilled to have John join our board,” said Lionsgate vice chairman Michael Burns in an interview with CNBC. “We think this is one of the world’s greatest investors and a very big brain in the media world.”
Burns also stressed that the timing for the alliance is particularly positive. “Any of his media holdings are interesting when you have global demand for content skyrocketing,” he added.
Malone is a congenital buyer and seller. Starz has been on the auction block for the past three years since Liberty announced its spinoff. At the same time, Malone has bought stakes in Charter Communications and ITV through his companies Liberty Global and Liberty Media, and engaged in a failed bid last year for Time Warner Cable. The Lionsgate deal is different, however, in that it’s one of the rare times he’s invested in a content creator, not a distributor.
“John Malone is probably the most experienced dealmaker and financial engineer in the media business,” said Vogel. “He’s extremely talented, and he has the money and borrowing power to do a lot of things others can’t. He’s able to steer a course that’s more independent than most other companies because he’s not beholden to shareholders.”
The deal comes at time of consolidation among pay TV providers. Cable giants like Time Warner Cable and Comcast are getting hitched at a furious clip, partly to guard against an uncertain digital future, and partly because the expansion of platforms online and on the smallscreen are driving demand for distinctive programming. There’s virtue in getting bigger.
When it comes to cutting deals for its shows and movies, Burns said Lionsgate will not be hindered by its one-third ownership of pay-cable provider Epix, on which it’s partnered with MGM and Paramount.
“We will sell our content to anyone,” he added.
A play for Starz makes sense for Lionsgate, which is winding down its “Hunger Games” franchise, has concluded its “Twilight” series and wraps up its Emmy-winning “Mad Men” this year. The steady subscription revenue that a cable operator generates would provide steady income while the studio searches for its next hit film series or watercooler show.
In a Wednesday report titled “Dating Before the Engagement?,” RBC Capital Markets analyst David Bank reaffirmed his “outperform” rating on Lionsgate and raised his price target to $39.
“The [Starz] deal could drive incremental TV business with the possibility of a transformative acquisition in the future,” he wrote.
He said the deal should help Lionsgate deepen its content relationship with Starz and give it opportunities to develop content relationships with other Malone-affiliated companies.
“While there are several potential outcomes, we think [Lionsgate] eventually acquiring [Starz] is the most likely one,” he added.
Given the sharp rise in both companies’ share prices, that outcome is what many investors are banking on.