Starz: Past Its Prime
Johannes Salim, CFA • 15 Comments
Johannes Salim, CFA • 15 Comments
Tue, Nov. 29, 8:55 AM
- Lions Gate (NYSE:LGF) say it will make additional disclosures about its merger with Starz (NASDAQ:STRZA) as part of a lawsuit settlement.
- Some of the supplemental information centers on the role of current Starz CEO Christopher Albrecht.
- "If the merger is completed, Starz’s current Chief Executive Officer, Christopher P. Albrecht, will continue to lead Starz networks as President and CEO, reporting to Lions Gate CEO Jon Feltheimer, and will join the Lions Gate Executive Management Committee. There are currently no other anticipated changes to the direct reports to Lions Gate CEO John Feltheimer."
- Starz closed at $33.68 yesterday vs. the deal price of $32.73.
- SEC Form 8-K
Thu, Nov. 10, 2:11 PM
- Starz (STRZA +0.7%) is joining in on AT&T's (T -1.7%) DirecTV Now streaming service.
- The Starz and Starz Encore premium channels (also including Starz Encore Westerns), eight in total, will be part of the new service when it launches this month, and more will be part at a later date, including entire video on demand catalogs.
- Starz has slowly been making a splash in the shifting media world, growing its original series (including Power, Survivor's Remorse, Outlander and Ash vs. Evil Dead) and nabbing first window rights to blockbusters including Star Wars: The Force Awakens and Avengers: Age of Ultron.
Wed, Nov. 9, 10:25 AM
- Time Warner (TWX -1.6%) is lower the morning after America elected Donald Trump its next president -- the man who called deals like AT&T's (T +0.5%) $85B buyout pact "poison."
- "Deals like this destroy democracy," Trump said at a recent rally speaking about the buyout. He said a Trump administration would never sign off on the acquisition since AT&T and CNN together would be "too much concentration of power in the hands of too few."
- That likely includes ripple effects on what has been a fairly rapidly consolidating media sector. Lions Gate (LGF -0.6%) and Starz (STRZA -0.4%) are set to combine and a number of other deals are in the speculative stages as telecoms and content creators adjust to a shifting landscape.
- AT&T looks forward to working with Trump and says it's still optimistic about the Time Warner deal, according to CFO John Stephens.
Thu, Nov. 3, 5:20 PM
- Lions Gate Entertainment (LGF -3.9%) beat expectations with fiscal Q2 results that the company figures are its last before a merger with Starz (NASDAQ:STRZA).
- The company posted a net loss of $17.5M (narrower than the year prior), adjusted to a net income of $16.9M. Revenue grew 34% with strong results in both core segments.
- Adjusted EBITDA swung from a loss to a positive $2.6M, missing an expected $5.6M.
- Revenue by segment: Motion Pictures, $464.4M (up 31.2%); Television Production, $175.1M (up 43%).
- In motion pictures, a bigger release slate meant theatrical revenue more than doubled, to $62M, while TV revenues from that segment were up 16% to $69.3M.
- Home entertainment revenue from motion picture and TV production increased 5% to $160.7M. Filmed entertainment backlog (revenue contracted but not yet recorded) hung at $1.5B.
- Segment profit: Motion Pictures, $6.6M (vs. a year-ago loss of $390K); Television Production, $12.1M (up 140%).
- Press Release
Mon, Oct. 31, 3:42 PM
- Lions Gate (NYSE:LGF) is up 1.5% today with its Halloween film sitting atop the box office for the second week -- and with Morgan Stanley launching coverage at Overweight.
- Analyst Ryan Fiftal set a $25 price target, implying 23% upside from today's higher price. He believes this year's pullback in the shares (they're down more than 20% since early February and nearly 50% over the past 12 months) sets up well for valuation.
- Meanwhile: "“Post merger, the investment thesis revolves primarily around Starz (NASDAQ:STRZA), which is showing top-line strength from new, higher-margin digital distribution platforms (e.g., Amazon.com)," he notes.
- The Starz deal and synergies should drive nearly 20% compound annual growth in EBITDA over the next three years, he says. The shift to skinny bundling should help as well, as he points out that Starz' over-the-top product is already gettting close to 1M subs at accretive economics.
Fri, Oct. 28, 4:25 PM
- In an SEC filing, Starz (STRZA +0.7%) notes that in connection with its deal to merge with Lions Gate (LGF +1.2%), its chief financial officer is resigning as of May 1.
- Scott Macdonald will leave his role then but will work in the meantime on the transition of the company's Finance and Accounting group.
- In a letter to Starz employees, CEO Christopher Albrecht took the chance to update workers on the post-merger structure and leadership, saying he'll continue to lead Starz Networks as president and CEO, and report to Lions Gate CEO Jon Feltheimer.
- Reporting to Albrecht will be COO Jeffrey Hirsch (who will have Chief Marketing Officer Alison Hoffman reporting to him), along with Chief Legal Officer David Weil, President of Programming Carmi Zlotnik, Executive VP of Finance Bill Bergmann, Executive VP of Communications Theano Apostolou and Executive VP of Human Resources Pamela Wolfe.
- Starz Distribution's home entertainment business will be subsumed into Lions Gate's Worldwide Home Entertainment, and Starz Worldwide's TV distribution group will be similarly combined.
- Previously: Stifel upgrades Starz to Buy; AT&T/TWX deal boosts valuation prospects (Oct. 28 2016)
- Previously: Starz sees networks gain, but program costs eat into profit (Oct. 27 2016)
Fri, Oct. 28, 3:09 PM
- Starz (STRZA +0.8%) is executing well, showing up in strong operational results, says Stifel Nicolaus in an upgrade note.
- The company missed profit expectations yesterday amid higher programming costs, but Starz Networks saw its biggest revenue increase in three years.
- Analyst Benjamin Mogil upgraded shares to Buy from Hold, and boosted his price target on the stock to $36 from $33, implying 15% upside from today's price.
- AT&T's deal to acquire Time Warner doesn't hurt a bit in valuation, he notes: That deal's implied valuation for HBO (the overall pact comes at enterprise value to adjusted operating income of 13.2 times) looks good for Starz, trading at EV/EBITDA of 9 times.
Thu, Oct. 27, 5:36 PM
- Starz (STRZA -0.8%) posted its largest Networks-unit revenue increase in three years in its Q3 report, though high programming costs took a toll on profits.
- Revenues inched up nearly 1% Y/Y as rate increases from distributors drove near-6% gains in its Starz Networks division. Operating income fell to $74M from a year-ago $101.8M, though, and adjusted OIBDA fell to $89.9M from the prior $114.7M.
- Revenue breakout: Starz Networks, $348.6M (up 5.9%); Starz Distribution, $60.9M (down 7.2%); Eliminations, -$1.7M.
- Subscriptions increased by 1.2M Y/Y, and by 300,000 this quarter, to 24.5M total. Combined Starz and Starz Encore subs came to 56M.
- On the streaming front, the Starz over-the-top service is nearing 1M subs with some help from Amazon.com
- Press Release
Thu, Oct. 27, 4:16 PM
Wed, Oct. 26, 5:35 PM
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Thu, Oct. 13, 5:56 PM
- Lions Gate Entertainment (LGF -3%) has priced $520M in senior notes and allocated loans under a $2B facility.
- The company priced the $520M in debt at an interest rate of 5.875% -- lower than the 7.5% rate assumed in the company's pro forma statements reflecting its proposed tie-up with Starz (STRZA -1.1%).
- It also said loans have been allocated under its $2B term loan B facility, which it expects to be issued at 99.5% and bear interest at Libor plus 3% (with a Libor floor of 0.75%). The pro forma statements had assumed that loan would be issued for $1.9B at 100% and at interest of Libor plus 3.75%.
- The loans are set to fund part of the company's merger with Starz.
Thu, Sep. 22, 4:21 PM
- Ahead of its merger with Starz (STRZA +0.4%), Lions Gate Entertainment (LGF +0.1%) has suspended its dividend.
- The company paid its dividend of $0.09/share in August that it had declared in June; forward yield at current pricing would have been 1.7%.
- The film/TV studio signed a cash and stock deal to buy Starz for $4.4B in June. It's expected to provide "immediate" synergies, said Lions Gate CEO Jon Feltheimer, who added that the acquisition "checks off all the boxes we look for."
- Lions Gate, up as much as 4.2% today, cruised to just a narrow gain at the close.
- After hours: STRZA +0.9%.
- Previously: AT&T signs carriage deal with Starz, taking Lions Gate stake (Sep. 22 2016)
Thu, Sep. 22, 1:46 PM
- AT&T (T +1.5%) is keeping up a string of channel-carriage deals ahead of its rollout of streaming DirecTV service, signing Starz (STRZA +0.6%) to a new distribution deal that includes joining DirecTV Now.
- Part of the deal includes AT&T taking an equity stake in Starz merger partner Lions Gate Entertainment (LGF +0.7%) -- who, when its own definitive deal is done, will pay AT&T three annual installments of $16.67M in stock or cash.
- Lions Gate has signed a multi-year deal with AT&T covering transactional video on demand, pay-per-view, and electronic sell-through.
- FBR's Barton Crockett says Starz gave AT&T a "big double-digit step-down" to renew the deal in a "jarring outlier." That's expected to be offset for Starz by over-the-top revenues.
- AT&T's recent deals: Discovery, Disney, NBCUniversal, Turner
Thu, Sep. 8, 1:00 PM
- Sling TV (DISH +1.1%) has rolled out an add-on pack for Starz (STRZA -0.5%), featuring content from the Starz and Starz Encore networks.
- The move includes more than 2,900 on-demand titles and comes in time for a Sept. 10 broadcast of Star Wars: The Force Awakens, that film's first airing on TV since last December's release.
- After a free preview, the package costs $9/month on top of the regular Sling subscription price.
- Sling is also the first over-the-top service to distribute Pac-12 Networks, offering all six of the regional college sports feeds to its customers nationwide. Those are available to Sling Orange and Sling Blue customers who subscribe to its "Sports Extra" add-on.
- The company has added a Windows 10 app as well.
Mon, Aug. 1, 8:39 PM
- Starz (NASDAQ:STRZA) today extended its overall deal with Curtis "50 Cent" Jackson, executive producer of the network's flagship series Power.
- The new deal will include Jackson taking the EP helm on a new project, Tomorrow, Today, a superhero drama.
- The third season premiere of Power set new viewership records for Starz, growing more than 58% from the second-season premiere.
Thu, Jul. 28, 7:12 PM
- With a $4.4B merger with Lions Gate (LGF -2%) on tap, Starz (STRZA -1.3%) posted a Q2 revenue miss
- Revenues fell 3.6% and operating income fell 5% to $105.4M. Adjusted OIBDA came to $127.4M, up 3% and beating an expected $113.7M.
- At Starz Networks, revenues were up 3% to $343.1M with the help of price hikes from various distributors. Operating income rose 9% to $121.1M; OIBDA was up 8% to $132.1M.
- Starz subscriptions rose by 200K to a new high of 24.2M. Starz and Starz Encore subs combine for 56M.
- It bought back $23.7M in shares from May 1 through June 30; with the merger under way, the company won't be buying back any more stock.
- Press Release