MGM In Talks To Acquire Epix From Viacom & Lionsgate

In a deal that could be valued between $1 billion-$2 billion, MGM is said to be negotiating to acquire all of the Epix premium cable network that it doesn’t already own from partners Viacom and Lionsgate, sources told Deadline. This comes after Lionsgate in January started the process to sell off its 31.2% stake in Epix, a month after the mini-major completed its $4.4B purchase of Starz. Viacom owns 50%. A deal with MGM is said to be likely, however, it is possible that another suitor could better a bid from partner MGM.

MGM

Lionsgate was expected to leave the Epix partnership after acquiring Starz, but execs have played coy when asked about the possibility. At an Investor Day gathering in January, CEO Jon Feltheimer said Epix “is very valuable and throwing off cash,” adding that Lionsgate and partners Viacom and MGM will “realize the value which ever way we all decide is best for our companies.”

He later quipped that Lionsgate will “treat Starz just like any other third-party customer that we paid $4 billion for.”

Analysts have pegged Lionsgate’s stake in Epix to be valued at $458M, which would make Viacom’s stake worth about $739M. The network is currently the No. 4-performing premium network behind HBO, Showtime and Starz. With the Starz acquisition, Lionsgate doesn’t really need the network anymore. MGM Holdings owns about 18.8% of Epix, which puts a valuation on that of around $277.7M.

An Epix deal would further bolster MGM’s TV and digital businesses (which it has been bullish on). Yesterday, the company reported Q4 earnings in which the television content unit — which includes United Artists Media Group after MGM in January bought the 45% in that it didn’t already own — saw revenues fall 8.8% to $68.1 million, but with a contribution up 117% to $33.9 million.

CEO Gary Barber told investors MGM plans to boost its content spending significantly this year to as much as $440 million, from $218 million in 2016. Reuters first reported on the MGM Holding talks today.