Lions Gate To Acquire Starz In $4.4 Bln Cash And Stock Deal

(RTTNews) - Lions Gate Entertainment Corp. (LGF) said Thursday that it agreed to acquire Starz (STRZA, STRZB), an integrated media and entertainment company, for $4.4 billion in cash and stock deal.

In the pre-market trading, LGF is up $2.06 or 9.84 percent to $23.00.

In the pre-market trade, STRZA is currently trading at $32.50, up $4.25 or 15.04 percent.

"This transaction unites two companies with strong brands, complementary assets and leading positions within our industry," said Lionsgate Chief Executive Officer Jon Feltheimer and Vice Chairman Michael Burns.

The agreement has been approved by the boards of directors of Lionsgate and Starz and will be submitted to their respective shareholders for approval as well as to regulatory authorities.

The proposed creation of Lionsgate non-voting stock is also subject to shareholder approval. Closing is expected to occur by year-end.

Lions Gate expects the acquisition to be highly accretive, generate significant synergies and create a whole that is greater than the sum of its parts.

The Company noted that it intends to fund the cash portion of the deal with a combination of newly issued bank and bond financing. Pro forma leverage, excluding synergies, is expected to be approximately 5.0x-5.5x as of December 31, 2016, with the ability to rapidly delever given the highly cash generative nature of the combined entity.

As per the terms of the agreement, each share of Lionsgate common stock will be reclassified into 0.5 voting and 0.5 newly created non-voting shares. Holders of each share of Starz Series A common stock will receive $18.00 in cash as well as 0.6784 of a share of Lionsgate non-voting stock based on a fixed exchange ratio.

Based on Lionsgate's 20-trading day volume weighted average price or "VWAP", as of June 28, 2016, the offer represents a total value of $32.73 per share to Starz shareholders, an 18% premium to Starz's 20-trading day VWAP as of the same date.

Holders of each share of Starz Series B common stock will receive $7.26 in cash and 0.6321 of a share of Lionsgate voting stock and 0.6321 of a share of Lionsgate non-voting stock.

The acquisition is expected to generate significant revenue and cost synergies.

The combined company will encompass: a 16,000-title film and television library; the largest independent television business in the world, including 87 original series on 42 U.S. networks; a feature film business that has generated over $7 billion at the global box office over the past four years; operation of or investment in 30 channel platforms around the world, including the flagship STARZ platform reaching 24 million U.S. subscribers, the STARZ ENCORE network with over 32 million subscribers and five OTT services; and a growing presence in location-based entertainment and video games driven by the company's deep portfolio of brands and franchises.