Lions Gate Entertainment Corp., the studio that produced “The Hunger Games” and “Mad Men,” is in advanced talks to acquire premium cable channel Starz, according to people with knowledge of the matter.
A deal, which would value Starz at more than $30 per share, could be announced in the next few days, said the people, who asked not to be identified because the information is private. An agreement hasn’t been reached and talks could still fall apart, the people said.
Starz rose 13 percent to $32 in early trading Thursday. The shares had closed at $28.25 Wednesday in New York, giving the company a market value of about $2.8 billion. Lions Gate climbed 8.8 percent to $22.78 early Thursday.
An agreement has been very close to being signed for a week now and has been held up over disagreements on price and voting shares, the people said. Mark Rachesky, whose MHR Fund Management LLC is Lions Gate’s largest shareholder, is a famously tough negotiator, as is John Malone, who controls Starz’s voting stock, and Starz Chairman Greg Maffei.
Lions Gate would buy Starz for mostly cash and some stock, said the people. The availability of financing isn’t an issue, despite the recent market turmoil, the people said. The two sides have come close to a deal several times since Lions Gate said it would make an approach to Starz in February, the people said.
Valuation, Shares
One sticking point on valuation involves Starz’s upcoming carriage negotiation with AT&T Inc.’s DirecTV, the people said. A multiyear deal hasn’t yet been struck with DirecTV, which clouds Starz’s future valuation, the people said.
A representative of Lions Gate declined to comment, while a representative of Starz didn’t immediately respond to a request for comment.
Malone has publicly discussed rolling up media companies to gain scale. Starz airs movies and original programming and has introduced an online-only subscription video service. The company said earlier this week that Chris Albrecht would remain as its chief executive until 2021.
Starz swapped 4.5 percent of its stock for 3.4 percent of Lions Gate’s outstanding shares last year. That deal put Malone on Lions Gate’s board, giving him more clout to push for a merger of Lions Gate’s growing television-production business and Starz’s platform, and leading to speculation that the move was a precursor for a full acquisition this year.
Source: Bloomberg.com