A Lionsgate and Starz memo to staffers has disclosed a few new details about their integration plans following the studio’s $4.4 billion acquisition of the premium networks company, which they expect to close by year end.
Lionsgate has hired Deloitte Consulting to help. Its people “will be on-site at Lionsgate for the next several weeks and will assist our integration teams with development of integration plans and recommendations,” execs told employees.
“Some quick process or system consolidations may be implemented in the near term after the transaction closes,” they added, “Broader initiatives may take up to 18 months to implement.”
Unidentified “colleagues from both Lionsgate and Starz” have been tapped for an integration team. “As we progress in our planning, we will evaluate the need to include additional colleagues in our planning efforts.”
They reiterated their plan to base the combined company in Los Angeles. They add that they’ll have “a continued presence in Denver, New York and London as well as other offices.”
Communications and Human Resources teams will “update employees on a regular basis.”
But those on the front line “should not share any integration-related communications with external parties at this time” because “it’s important that we speak with a single unified voice.”
The memos offered a rosy view of the companies’ future together.
The combo “will create a global content powerhouse” that will have “greater scale for attracting world-class talent, creating platform-defining content and distributing it with an incredible array of options.”
Wall Streeters remain mixed about the value of the deal for Lionsgate. Its share price has fallen about 37% in 2016.
In a report yesterday, Bernstein Research’s Todd Juenger says that those who like the combination envision that “some future Lionsgate production will become a huge hit on Starz (similar in proportion to Orange is the New Black on Netflix, or Mad Men on [AMC Networks]), only now Lionsgate will capture the full value in its own Enterprise.”
But he lowered his earnings estimates, noting bears’ concerns about the debt Lionsgate will have to take on leaving “lots of downside if Starz deteriorates.”
That’s worrisome, he says, because they’re competing against “much bigger brands with much deeper pockets, including: HBO, Showtime, Netflix, Amazon, Hulu, (and Epix). Not to mention conventional TV networks like: the broadcast networks, FX” and AMC.
Barrington Research’s James Goss says he likes the stable cash flows Starz offers Lionsgate, as well as “significant” tax benefits from putting Starz in a company that’s incorporated in Canada and pays its lower rates.
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