Film studio Lionsgate to buy Starz for $4.4 billion

Thu Jun 30, 2016 3:27pm EDT
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By Liana B. Baker

(Reuters) - Lions Gate Entertainment Corp LGF.N, the film studio behind the Hunger Games movies, said Thursday it would buy premium television network Starz STRZA.O for $4.4 billion in cash and stock, in a deal that would unite two media companies with ties to cable mogul John Malone.

Both companies held on and off talks for some time. The long-anticipated deal will help diversify Lionsgate's business and make its financials less dependent on whether it can deliver a hit movie, according to Jefferies analyst John Janedis.

Lionsgate Chief Executive Jon Feltheimer said on a conference call that the deal creates a "global content powerhouse that invests nearly $2 billion a year in new content."

Starz, which competes with HBO and Showtime, also develops original program such as the fantasy series "Outlander."

Lionsgate's bet on a cable network comes with risks, however, as more viewers watch television online and buy fewer cable subscriptions.

"It also increases exposure to the premium cable network business, which faces challenges of its own in a more fragmented media landscape," Janedis said.

Lionsgate will pay $32.70 per share for Starz, representing a premium of nearly 16 percent to Starz's closing price Wednesday.

Shares of Lionsgate fell 3 percent at $20.32, while Starz shares were up 7.6 percent at $30.40.   Continued...

Chief Executive Officer of Lions Gate Entertainment, Jon Feltheimer (3rd L), claps with actors from the show Mad Men (L-R) John Slattery, Christina Hendricks, Jon Hamm, January Jones, and Kiernan Shipka with the show's creator Matthew Weiner (C) while visiting the New York Stock Exchange to ring the opening bell in New York, March 21, 2012.   REUTERS/Lucas Jackson