MGM Acquires Full Ownership of Epix for $1 Billion

The studio has bought out all of Viacom and Lionsgate’s interests in the premium pay TV network.

Metro-Goldwyn-Mayer has acquired Epix from co-venture partners Viacom and Lionsgate for $1.031 billion.

The deal includes Paramount Pictures and Lionsgate having multiyear agreements to continue bringing first-run movies to Epix. MGM, which already has a 19 percent stake, is set to control Epix's four linear pay TV channels available in the U.S. market.

The acquisition, pending regulatory approvals, is expected to close by the end of the month. The deal also values Epix at $1.275 billion, which includes $75 million in distributions to the joint venture partners to be paid out one day before the transaction closes.

Lionsgate in an SEC filing said it stands to receive $397.1 million for its 31.15 percent stake in Epix. Lionsgate and Viacom will also receive unspecified additional payments should MGM spin off any of the Epix assets during specific time periods.

MGM Holdings, parent of the Hollywood studio behind the James Bond film franchise, had been in talks for some time to acquire Epix from fellow shareholders Lionsgate and Viacom. The deal hinged on an overall valuation for Epix, thought to be in the $1 billion-$2 billion range.

"The addition of Epix provides MGM with a premier distribution platform that complements our strong stable of new and library content in both film and television," Gary Barber, chairman and CEO of MGM, said Wednesday in a statement.

The MGM deal for Epix is no surprise as Lionsgate in late January signaled it wished to sell its holding in the premium channel following its acquisition of Starz. Viacom also stirred speculation on Wall Street over the future of Epix when it explored a recombination with CBS.

Epix recently saw Mark Greenberg, president and CEO, extend his employment agreement with the premium entertainment network. Greenberg in a statement Wednesday said the time was right for MGM to acquire full control of the company as Lionsgate and Viacom had seen their businesses evolve away from the pay TV platform.

"Now is the right time to capitalize on their initial investment and focus their attention on their other businesses," he said.

It's understood Lionsgate has been looking since its recent merger with Starz to monetize non-core assets, of which the Epix stake was one. Lionsgate CEO Jon Feltheimer in a statement wished the Epix management well as his studio shifts its "investment focus to our wholly-owned platforms."

Viacom president and CEO Bob Bakish in his own statement said his company aimed to "strengthen our balance sheet by realizing the value of our equity investment." The sale of the Epix stake comes as Bakish continues a turnaround strategy at Viacom with a focus on Paramount Pictures, MTV in the U.S. and relationships with TV distributors in the U.S.

Wall Street watchers welcomed the MGM deal for allowing Viacom to cash in on its 49.76 percent stake and Lionsgate its 31.15 percent stake in Epix.

Macquarie Capital analyst Amy Yong told The Hollywood Reporter that Lionsgate selling its Epix stake would help bring down its debt leverage. "Blessed with Malone DNA, we see Lionsgate as a consolidator of free radicals" in the content space, she said.

B. Riley & Co. analyst Eric Wold said that the purchase price for Epix was "on the low end of expectations," but, he added, "we believe it makes sense for Lionsgate to move on from its successful investment in Epix and focus on the opportunity around Starz."

Epix has a content foundation from its joint venture partners’ first-run movie franchises, including The Hunger Games, Mission: Impossible, Star Trek and the Bond pics. Now it is building up its TV business with the original scripted series Graves, a half-hour political satire produced with Lionsgate TV, and Berlin Station, a contemporary spy-thriller from Paramount TV and Anonymous Content.

The acquisition of Epix aims to bolster MGM's TV business, which is run by Mark Burnett, the reality TV pioneer behind such hits as Survivor, The Apprentice, Shark Tank and The Voice and the driving force — along with his wife, Roma Downey — behind the miniseries The Bible and other faith-based programming.