Lionsgate "Intends to Explore" Starz Deal

Lionsgate Official Logo - H 2012

Lionsgate Official Logo - H 2012

Lionsgate “intend to have discussions with [Starz], its affiliates, and other persons about potential combinations," acording to a regulatory filing.

Starz said in a regulatory filing on Thursday that Lionsgate “intends to explore whether there is a potential mutually beneficial combination of the two companies.”

Towards that end, Lionsgate “intend to have discussions with [Starz], its affiliates, and other persons about potential combinations that may involve stock or a combination of stock and cash.”

The filing added that “Lions Gate has further informed the issuer that it believes any such combination should recognize the relative values of both companies and that the benefits of a transaction should be shared appropriately by both companies’ shareholders.”

It continued: “There can be no assurance that there is or will be any such combination, that such combination would be acceptable to either the Issuer or its shareholders, or that the structure, price, mix of consideration and terms that such a combination could take or the time that it could take to determine whether or not there is such a combination will occur.”

Diiscussion of a Lionsgate-Starz combination comes nearly a year after talks on a possible merger first surfaced before Liberty Media boss John Malone swapped a portion of his stake in Starz for a bit of The Hunger Games studio. That investment followed speculation that Starz was looking to sell itself to a bigger company, with some analysts seeing that as a precursor to a hook-up between the cable company and Lionsgate.

At the end of last year, Lionsgate took a stake in Starz to get deeper into business with Malone. A merger of Lionsgate and Starz is not thought to be imminent, as the latest discussions are reportedly at an early stage.

In fact, Bernstein entertainment analyst Todd Juenger on Wednesday warned not to expect a Lionsgate-Starz pairing anytime soon. "Lionsgate's acquisition history suggests they are patient (and cheap). We see don't see any cause for urgency here. If/when a deal does happen, it will probably be good in short term for both stocks, at which point we would revisit the investment case going forward," Juenger wrote in an investment note.

The latest speculation also follows Malone's talk of the need for "free radicals" in the content space to combine to increase their scale, leading observers to suggest he could use Lionsgate as his consolidation vehicle.