Lionsgate Launches Talks to Sell Epix Stake to MGM, Paramount (Report)

Jon Feltheimer Getty H 2016
Mike Pont/FilmMagic

The studio, led by CEO Jon Feltheimer, looks to be making good on a possible sale of its 31.2 percent holding in the wake of its merger with Starz.

Lionsgate is in early talks to possibly sell its 31.2 percent stake in Epix in the wake of its merger with Starz, Reuters reported on Thursday.

A Lionsgate spokesperson declined comment on the report. But a possible move by the studio to offload its Epix stake to its fellow shareholders, MGM Holdings and Paramount, a unit of Viacom, has been expected for some time.

The deal for Starz, first unveiled in June 2016, put an immediate question mark over Epix, in which Lionsgate is a minority investor in a three-way joint venture with Viacom and MGM. Earlier speculation pointed to the three studios taking the premium cable TV channel public via an IPO.

RBC Capital Markets analyst Steven Cahall in an investors note put the overall value of Epix as an asset at $2.56 billion, while Eric Wold, an analyst at B. Riley Co., has in the past talked about a potential valuation at $3 billion to $3.5 billion.

"The only question at this point, in our opinion, would be the valuation of Epix in any transaction and potential proceeds to Lionsgate," to reduce the studio's debt after the Starz merger, Wold wrote in his own investors note. 

Lionsgate CEO Jon Feltheimer has maintained that Epix is not core to its business plans now that it has combined with Starz. "We have tremendous optionality with Epix. It's a very valuable platform. We'll be having those conversations with Viacom ... and we have a great partner in MGM," he said in November during a conference call with analysts.

More recently, during Lionsgate's first-ever Investors Day after completing the Starz merger, Feltheimer hinted again at talks over the future of Epix, where the three partners would “realize the value whichever way we all decide is best for our companies.”

Jan. 27 1:00 p.m. Updated with commentary and assets evaluations by media analysts.