Lionsgate CEO Jon Feltheimer said Thursday that the company is planning to unveil its plans for Starz by the late summer and close a deal by next spring as the process to monetize the premium channel and streamer moves forward.
He also hinted that more M&A could be in store for both Lionsgate and Starz if the two companies were separate.
“We are targeting an announcement of our plan by the end of the summer and expect a transaction could close as early as our fiscal fourth quarter,” the chief executive said on a conference call today to discuss the company’s latest earnings. Lionsgate’s fiscal year ends in March.
Feltheimer said the company is engaged in conversations with bankers and “a number of potential strategic partners.”
Canal+, a division of French conglomerate Vivendi, has been in the mix as potential suitor, as have Roku and Apollo Global management bidding jointly for a minority stake. DirecTV is also interested.
Lionsgate acquired Starz for $4.4 billion in 2016. It announced last fall it was exploring strategic options for the cable network and streamer that has been growing fast in streaming under Jeff Hirsch but failed to provide a bump for its parent, which calculated that selling all or a part of the asset could unlock value.
The company exceeded analysts’ consensus in streaming last quarter, adding subs to reach a total of 35.8 million. The bulk is Starz — up 47% year on year — with 12.8 million from the StarzPlay International consortium, up by almost double that.
“Although streaming is not an end in itself, it is a very efficient way to bring content to our customers worldwide,” Feltheimer said.
Asked during a Q&A to clarify plans for Starz, he affirmed that the plan is for Starz to be separated from Lionsgate, which will retain a stake, barring anything unforeseen.
“The main impetus for the separation is that we don’t feel that the Street is giving us the value for the sum of the parts. We feel like with the companies separated they can both concentrate on their core businesses, and my sense is they will both see some opportunities, some strategic opportunities, that they might not see while the companies are combined.”
“But honestly, anything could happen and that’s why we are not giving you more details right now,” he said.
Lionsgate stock has taken a beating in a volatile market that’s been a bit down on streaming lately. It fell 3.7% during today’s session but popped higher — by 4% – in late trading. The quarterly number and call came after market close. At about $11, the shares are still well off their $52-week high of $21.
Feltheimer acknowledged that “this kind of environment puts kind of damper on virtually everything. It’s hard to see our stock getting hit when we are having such a … huge value-creation year.” He emphasized that Starz is not chasing bigger streaming rivals but remaining a niche, ad-free service to be “layered” on top of them.
“I don’t think the Street is recognizing this. I hope potential partners do,” he said.
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