What’s the Rationale for the Starz-Lions Gate Merger?



Rationale for the merger

As we saw in the first part of this series, Starz (STRZA) and Lions Gate are merging in a stock and cash transaction. Starz shareholders will receive $18 plus 0.6784 shares of Lions Gate non-voting stock. Prior to the close, Lions Gate shareholders will receive 0.5 shares of voting stock and 0.5 shares of non-voting stock. This deal is about increasing content and distribution. The combined company will have a library of 16,000 titles, a feature film business, and investment in 30 different channels.

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Management comments

“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,” said Dr. Mark H. Rachesky, Lionsgate’s Chairman of the Board. “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.”

“This transaction unites two companies with strong brands, complementary assets and leading positions within our industry,” said Lionsgate CEO Jon Feltheimer and vice chairman Michael Burns. “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.”

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Synergies and earnings impact

The companies claim that the deal will increase synergies. However, they don’t specify what they are in the press release. They also didn’t quantify them on the conference call.

Other merger arbitrage resources

For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.


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