Starz: Past Its Prime
Johannes Salim, CFA • 15 Comments
Johannes Salim, CFA • 15 Comments
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, Jul. 7, 12:09 PM
- In a Sun Valley media conference tradition, cable mogul John Malone weighed in on one of his most frequent questions: evaluating the current environment for mergers and acquisitions.
- "There's always M&A opportunities," he said. "I have nine different public companies I'm involved in, and they're always looking for opportunities."
- As for cheaper European assets post-Brexit: "Cheap is a relative term; I think it depends on your longer-term view. I think Britain's gonna be fine; I think the EU is gonna be fine. I think there are gonna be some banking, capitalization issues that have to be dealt with."
- He's coming off a $4.4B deal to combine his Starz network (STRZA +1.8%) with Lions Gate (LGF +3.1%), and "they're both subscale ... this gives them the opportunity to be bigger, be a little more aggressive in investing in content, trying new things."
- Malone's more interested in the TV business, but Lions Gate will get a new outlet for its films after tough times at the box office: "Theatrical is a tough business and you can run hot and cold ... The question is can you tame the movie business to reduce the volatility?”
- Asked about Viacom (VIA +3.1%, VIAB +3%) -- currently embroiled in a succession drama and (logically) speculation about combining it with other firms: “I’m hoping that all settles down and everybody is treated fairly,” said Malone. “Sumner [Redstone's] been a long-term friend and sometimes partner and sometimes 'frenemy.' You hate to see the stress of a family situation. I certainly hope it all works out to everybody’s benefit."
- On Viacom's sale of a Paramount stake: "Would I? The theatrical side? No, that would not be where I would go." But Viacom has "got some great assets and right now because of the turmoil they're substantially undervalued."
Thu, Jun. 30, 7:23 PM
- The deal to acquire Starz (NASDAQ:STRZA) "checks off all the boxes we look for" in a deal, said Lions Gate (NYSE:LGF) CEO Jon Feltheimer in a call to discuss the $4.4B acquisition.
- It's highly accretive to earnings and free cash flow, positions us to achieve significant synergies," he said. "It's a transaction that creates a whole, greater than the sum of its parts, and is a combination that unlocks significant immediate and long term value for our shareholders.
- After rising as much as 11.6% today, Lions Gate finished down 3.4%. STRZA wrapped up the day up 5.9% after rising as much as 14.7%.
- He believes there are immediate cash savings available in not only the operational synergies, but the "extended benefit of being a Canadian multinational company" along with accumulated net operating losses.
- Starz chief Chris Albrecht will continue to run that unit and is expected to join the executive committee as well, Feltheimer said.
- The company has $4.6B in committed financing for the deal, it says, along with range for a $1B revolver that will be available for working capital.
- Previously: Lions Gate inks deal for Starz (Jun. 30 2016)
- Previously: Bloomberg: Lions Gate buyout of Starz in advanced talks; LGF +5.1%, STRZA +6.9% (Jun. 29 2016)
Thu, Jun. 30, 8:17 AM
- Lions Gate (NYSE:LGF) agrees to buy Starz (STRZA, STRZB) in a cash and stock deal totaling $4.4B. Starz A class owners will receive $18 in cash along with 0.6784 of newly-created non-voting stock of LGF for each share of STRZA they hold. Starz B class owners will receive $7.26 in cash, 0.6321 of a share of LGF voting stock, and 0.6321 of a share of LGF non-voting stock.
- The offer translates to $32.73 per A class share based on Lions Gate's 20-day moving average price.
- A conference call is set for 9 ET.
- STRZA +15% to $32.50, LGF +8.2% to $22.65 premarket.
- Previously: Bloomberg: Lions Gate buyout of Starz in advanced talks; LGF +5.1%, STRZA +6.9% (June 29)
Wed, Jun. 29, 6:05 PM
- It's been discussed extensively, but a deal for Lions Gate Entertainment (NYSE:LGF) to buy Starz (NASDAQ:STRZA) is now in advanced talks, Bloomberg reports.
- Lions Gate is up 5.1% after hours; it had gained 4.1% during the regular seesion. Meanwhile, STRZA is up 6.9% in the postmarket session after gaining 2.7% today.
- A deal could come in the next few days valuing Starz at more than $30/share (postmarket quotes have Starz at $30.20 now), sources told Bloomberg. But negotiations may come down to contentious discussions between John Malone (who controls Starz voting stock) and Starz Chairman Greg Maffei on one hand, and Mark Rachesky, whose MHR Fund Management is Lions Gate's biggest shareholder.
- A deal would be mostly cash with some stock, and could be held up by Starz's unfinished carriage talks with DirecTV.
Thu, Jun. 23, 12:07 PM
- Starz (NASDAQ:STRZA) has jumped 5.4% in recent minutes amid chatter that there are new talks of a tie-up with Lions Gate Entertainment (NYSE:LGF).
- Lions Gate is up 3.2% in recent minutes as well. Sources tell TheStreet that talks are back on after cooling in the fall.
- The stocks had gotten a boost in October amid speculation that the two could tie up and unite a pair of interests by cable mogul John Malone. Lions Gate has a 15% voting stake in Starz.
Thu, Apr. 28, 10:47 AM
- Lions Gate Entertainment (NYSE:LGF) is up 6.9% to its highest point in five weeks on no catalysts other than some peer M&A today, in DreamWorks Animation's $3.8B deal to be acquired by Comcast.
- Lions Gate has been linked in the past year to heavy merger rumors with John Malone's companies, after Malone's Liberty Global (NASDAQ:LBTYA) and Discovery Communications (NASDAQ:DISCA) made a strategic deal with the studio -- and then Malone floated public comments regarding a potential tie-up/merger with Starz (NASDAQ:STRZA), in which he also holds an interest.
- Bloomberg analyst Paul Sweeney figures Comcast's deal price means a multiple of at least 19.5 times DreamWorks Animation's 2016-2017 EBITDA -- which multiple is a 28% premium to Lions Gate, which runs similar TV and movie interests.
- And Lions Gate may be more attractively valued than during the fall rumors, after a weak fiscal Q3 tanked shares in early February and the studio's recent films, like The Divergent Series: Allegiant, are underperforming.
- Now read My Top Media And Publishing Stocks For 2016
Mon, Mar. 14, 12:03 PM
- Lions Gate (NYSE:LGF), frequently the subject of merger rumors of late, could get pushed into a deal by activists who have been ramping up stakes in the indie studio.
- Alibaba and Netflix (NASDAQ:NFLX) are linked by analysts as possible suitors with an eye to building up content stores, The Deal notes.
- Jana Partners and Barry Rosenstein lifted their share of the studio to 5.7% last month, making it No. 3 among outside shareholders. And Eminence Capital has built a stake near 1%. Canadian companies such as Lions Gate require only a 5% stake to requisition a special shareholder meeting to press board changes.
- As usual, John Malone is the X-factor, with a distinct interest over the past year in what happens to Lions Gate. Last fall, Liberty Global (NASDAQ:LBTYA) and Discovery Communications (NASDAQ:DISCA) entered a long-term strategic deal with the studio (Malone has large stakes in those two, along with a 3.4% LGF stake taken in February). And he had floated an LGF tie-up with Starz (NASDAQ:STRZA), in which he also holds a stake among others.
- Another likely merger appeal: With a Vancouver base, Lions Gate could serve as part of a tax inversion deal.
Wed, Feb. 3, 4:27 PM
- Lions Gate (NYSE:LGF) is back a the negotiating table with Starz (NASDAQ:STRZA) over an acquisition, reports Bloomberg.
- The company made a serious effort late in 2014 to buy Starz only to be scared off by the deal price.
- LGF spiked late to finish with a 1.4% gain, while Starz also jetted up in the last hour of trading to end +1.8%.
Nov. 9, 2015, 8:05 PM
- With the review of Charter Communications' (NASDAQ:CHTR) buyout of Time Warner Cable (NYSE:TWC) proceeding apace at the FCC, the agency is sending requests tied to cable mogul John Malone's holdings not only in Charter but in content companies like Discovery (NASDAQ:DISCA) and Starz (NASDAQ:STRZA), which supply Charter rivals.
- The agency has sent letters to the companies that list Malone as their chairman -- Liberty Media (NASDAQ:LMCA), Liberty Interactive (NASDAQ:QVCA) and Liberty Broadband (NASDAQ:LBRDA), which holds 26% of Charter -- and asked about Malone's influence over those entities as well as the content creators and DirecTV.
- It's a "pretty meaningful request," says BTIG's Rich Greenfield, while Craig Moffett points at the Comcast deal for NBCUniversal in saying that Malone's tangled ownership is "probably not a big issue."
- Malone has a 46.6% voting interest in Liberty Broadband, which would be entitled to vote no more than 25.01% of shares in the new combination, Charter has said. His interests in Discovery and Starz are "minority interests" where he wouldn't control day-to-day decisions.
- The American Cable Association (representing smaller providers) argues that Malone's interests aren't insubstantial and that consumers can expect higher rates unless the FCC imposes conditions on the deal.
- Previously: BTIG: Are TWC, Charter too strong separately to sell merger case? (Nov. 02 2015)
- Previously: Charter call: Talking wireless ambitions, slamming password sharing (Oct. 29 2015)
Sep. 16, 2015, 10:20 AM
- With traditional pay TV subscribers on the wane, a potential purchase of Starz (STRZA +5.6%) is not the best way to spend AMC Networks' (AMCX -1.1%) "M&A powder," says Stifel Nicolaus' Benjamin Mogil.
- Adding Starz won't change AMC's affiliate positioning, he writes, though for Starz (up solidly today), the combination makes more sense as a way to accelerate a possible discussion with Lions Gate (LGF +0.9%).
- He rates AMC Networks as a Buy and Starz at Hold.
- A deal here could speed up additional consolidation in the space, writes Macquarie's Amy Yong, who holds a Neutral rating on AMCX and Outperform on STRZA.
Sep. 15, 2015, 5:39 PM
- Starz (NASDAQ:STRZA) is up 7% in after-hours trading on news that it's in talks to be acquired by AMC Networks (NASDAQ:AMCX), itself up 2.5% after hours.
- Bloomberg reported the preliminary talks, which come after a few abortive attempts by suitors to acquire Starz in the past year. “They probably ultimately need to combine with others at least from a bundler point of view, if not from an ownership point of view,” John Malone -- Starz's top individual investor -- said last week.
- An AMC deal would require the sign-off of the Dolan family, who control voting power after AMC was spun off from Cablevision four years ago.
- Starz has a market cap of $3.9B and an enterprise value that's grown to more than $5B from $4B last year, during a period when it was often linked to Lions Gate Entertainment (NYSE:LGF). Shares in Starz are up 26.1% over the past 12 months.
Jul. 9, 2015, 5:29 PM
- There's been little news coming out of secretive Sun Valley -- where media moguls gather at the Allen & Co. conference for "summer camp" and sometimes rearrange billions of dollars with game-changing M&A -- but John Malone today dropped more hints about content consolidation.
- While media distribution companies have more obvious benefits from consolidation, Malone -- who has hands in Liberty Global (NASDAQ:LBTYA), Liberty Media (NASDAQ:LMCA), Liberty Interactive (NASDAQ:QVCA), Charter (NASDAQ:CHTR) and Starz (NASDAQ:STRZA) -- said economies can apply to content too.
- "It's all about global scale," he told CNBC. "If you want to be a meaningful player in most of any of these media communication businesses, you have to think about it."
- And while speculation boils about a tie-up between Malone's Starz (STRZA) and Lions Gate (NYSE:LGF) after the two swapped stock, Malone focused on the educational side: "I'm an engineer; what the hell do I know about content? Trying to understand where these ideas come from, how they get created and produced. The development of stories is really going to be important in this random-access world that Reed Hastings (NASDAQ:NFLX) is driving us into."
- Malone said Netflix changed the game, and that his companies "missed the boat a little bit" on over-the-top offerings.
- Today: NFLX +2.4%; LGF +0.9%; QVCA +0.3%; CHTR +0.2%.
Jun. 3, 2015, 4:41 PM
- A revitalized John Malone is ready to push consolidation across media firms, with his eye on content now that the Charter-Time Warner Cable wheels are in motion.
- The "bundle" is coming apart, he tells the WSJ, and as he hinted at earlier this spring, Lions Gate (NYSE:LGF) could play a key role in content mergers.
- “Lions Gate could buy Starz (NASDAQ:STRZA) and potentially other free radicals in the industry,” Malone said. Scripps Networks Interactive (NYSE:SNI) or AMC (NASDAQ:AMCX) could be targets though those agreements might be difficult.
- Malone engineered a stock-swap earlier this year between Lions Gate and Starz that put him on LGF's board in exchange for 4.51% of Starz, and Lions Gate was reportedly close to a Starz buyout before valuation concern killed the deal.
- Asked at an investor meeting about CBS and Viacom, Malone didn't announce any plans, pointing to the Sumner Redstone succession issue (Redstone controls near 80% of both companies) -- though there's wide belief that either could be for sale after Redstone's death.
- Aside from his involvement in Starz and Lions Gate, Malone also has a 29% voting stake in Discovery Communications (NASDAQ:DISCA) as well as a stake in ITV (OTCPK:ITVPF), not to mention his position in the various Liberty companies. (Liberty Broadband is backing Charter in its TWC takeover.)
- After a flat day, Starz spiked 1.5% heading into the close, and Lions Gate finished the day up 1.8% as Malone's comments came to light.
Apr. 29, 2015, 10:33 PM
- Confirming some industry speculation, Lions Gate Entertainment (NYSE:LGF) was close to buying Starz (NASDAQ:STRZA) when the two entered a stock-swap deal in February -- and it fizzled in part because of Starz' valuation, The Wrap's Jon Erlichman writes.
- John Malone (Starz' biggest shareholder) got a board seat at Lions Gate and Starz got 3.43% of LGF in trade for 4.5% of Starz. But Malone reportedly wanted to make a deal, and Starz had talked with Viacom (VIA, VIAB) Sony (NYSE:SNE) and Fox (FOXA, FOX) last fall, Erlichman says.
- Starz reports earnings tomorrow and any buyer will have to pony up more now than last September: Shares are up more than 30% from their lowest point then, to $38.60 today. If Starz' valuation was a problem for LGF in February, it's bigger now.
- But Starz CEO Chris Albrecht describes the two companies as "kissing cousins" and a consolidating industry may force Malone's hand somewhat.
- Previously: Wolff: Get ready for 'M&A mania' with media consolidation (Apr. 09 2015)
- Previously: Maffei: More might come from Malone-Lions Gate relationship (Mar. 09 2015)
Apr. 9, 2015, 9:08 PM
- Don't let recent merger challenges and failures fool you, Michael Wolff argues: "M&A mania" is coming to a media conglomerate near you amid pressure for a new wave of consolidation.
- "Perhaps never before has consolidation been so much the flavor of the month, nor has it seemed so difficult to get a taste," he writes. "The table is set, but nobody's sitting down to eat."
- If Comcast (NASDAQ:CMCSA) fails in its bid for Time Warner Cable (NYSE:TWC), he notes, it just means other cablers will step up to match Comcast's ambition, and Comcast will still look for a way to stay dominant.
- He points to a number of mergers he thinks are easily imaginable: Viacom (NASDAQ:VIA) and FOX? Disney (NYSE:DIS) and Time Warner (NYSE:TWX)? TWC and Charter (NASDAQ:CHTR)? Discovery (NASDAQ:DISCA) and, well, most anyone (Disney, Fox, CBS)?
- Factors encouraging the wave: Media's all about video now, and the pure-play aspect makes merger logic cleaner; distribution and content are separate and now even antagonistic businesses; the growth of over-the-top means not unbundling but re-bundling; and everyone needs scale for negotiation strength in content and ad deals.
- Other key players: John Malone (LMCA, LBTYA, STRZA); Verizon (NYSE:VZ); Lions Gate (NYSE:LGF); Scripps Networks (NYSE:SNI); Netflix (NASDAQ:NFLX); DirecTV (NASDAQ:DTV) and AT&T (NYSE:T); Dish Network (NASDAQ:DISH).