Lions Gate Moves to Acquire Starz

Both Lions Gate Entertainment Corp. (NYSE: LGF) and Starz (NASDAQ: STRZA) are watching their shares make a handy gain early on Thursday after the announcement of an acquisition. The companies announced an agreement where Lionsgate will acquire Starz in a cash-and-stock deal totaling $4.4 billion.

The transaction has been approved by both boards of directors and is expected to close by the end of the year. However, the deal is still subject to shareholder and regulatory approval.

As part of the agreement, each share of Lionsgate common stock will be reclassified into 0.5 voting and 0.5 newly created non-voting shares. On the other side, holders of each share of Starz Series A common stock will receive $18.00 in cash as well as 0.6784 of a share of Lionsgate non-voting stock based on a fixed exchange ratio.

Based on Lionsgate’s 20-trading day volume weighted average price (VWAP), as of June 28, the offer represents a total value of $32.73 per share to Starz shareholders, an 18% premium to Starz’s 20-trading day VWAP as of the same date. Holders of each share of Starz Series B common stock will receive $7.26 in cash and 0.6321 of a share of Lionsgate voting stock and 0.6321 of a share of Lionsgate non-voting stock.

Dr. Mark H. Rachesky, Lionsgate’s Chairman of the Board, commented:

The combination of Lionsgate and Starz brings significant scale to our portfolio of content and distribution assets and will enable us to compete successfully in today’s rapidly evolving global entertainment marketplace. By bringing together complementary resources, premium quality intellectual property and exceptional management, this strategic transaction positions us extremely well to unlock the underlying value of our content to create substantial lasting value for our shareholders.

Jon Feltheimer CEO of Lionsgate and Vice Chairman Michael Burns, added:

This transaction unites two companies with strong brands, complementary assets and leading positions within our industry. We expect the acquisition to be highly accretive, generate significant synergies and create a whole that is greater than the sum of its parts.  Chris Albrecht and his team have built a world-class platform and programming leader, and we’re proud to marshal our resources in a deal that accelerates our growth and diversification, generates exciting new strategic content opportunities and creates significant value for our shareholders.

Shares of Lions Gate closed Wednesday up 4% at $20.94, with a consensus analyst price target of $27.06 and a 52-week trading range of $16.21 to $41.41. Following the announcement the stock was up over 10% at $23.10 in early trading indications on Thursday.

Shares of StarzA closed up 2.7% at $28.25, with a consensus analyst price target of $32.34 and a 52-week trading range of $20.33 to $46.59. After the release, the stock was up 15% at $32.50 in early trading indications Thursday.

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