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Discovery, Liberty Global Buy Lions Gate Stakes

Discovery Communications and Liberty Global have teamed up with content provider Lions Gate Entertainment, each purchasing a 3.4% interest in the movie studio and TV production house for a combined $390 million.

Both Liberty Global and Discovery agreed to each buy 5 million shares of Lions Gate stock for $195 million each.    

The 10.0 million shares will be acquired from funds affiliated with MHR Fund Management LLC.

Additionally, Liberty Global and Discovery Communications will each have one designee appointed to Lionsgate's Board of Directors -- President and CEO Mike Fries for Liberty Global and President and CEO David Zaslav for Discovery Communications. Liberty Global and Discovery Communications are each entering into separate commercial agreements with Lionsgate providing for a preferred partner relationship with respect to licensing rights for certain theatrical and television content across their markets.  The share acquisitions are expected to close later today.

“We’re very enthusiastic about this alliance with Lionsgate, and I’m pleased to join Chairman Mark Rachesky and the rest of the Lionsgate Board,” Fries said in a statement. “The company is a unique success story in the entertainment industry. Lionsgate is led by an incredible management team and they’ve created one of the deepest portfolio of brands and franchises in the industry. This strategic content investment will also create opportunities for Lionsgate to become an even more important supplier of high-end premium content to our 24 million video and 18 million broadband subscribers.”

The moves come about nine months after Liberty Global chairman (and Discovery board member) John Malone personally purchased a 3.4% interest in Lions Gate by swapping a 4.5% stake he held in premium channel Starz.

Lionsgate will be entering into certain agreements with Liberty Global, Discovery Communications, Malone and MHR Fund Management LLC. These agreements are intended to include among other things, rights pursuant to which Liberty Global, Discovery Communications and MHR Fund may designate members to the Lionsgate Board of Directors subject to certain share ownership thresholds and under which they have each agreed to vote the common shares owned by them (together with certain of their affiliates) in favor of each of the other’s respective director nominees.  The agreements are also intended to include restrictions of purchases and sales of Lionsgate common shares for prescribed periods of time, together with rights and obligations relating to certain corporate actions with Lionsgate during such time.

"One of Discovery's advantages is our ownership in a diverse portfolio of global content and IP, which uniquely positions the company to deliver an audience across multiple media ecosystems," Zaslav said in a statement. "Lionsgate has created a strong television business and we are proud to take this ownership stake to gain access to terrific storytellers, creative leadership, and global formats and IP, in both nonfiction and scripted programming. As with all of our creative partners, we look forward to telling world-class stories with Jon and the deep management team at Lionsgate, and further strengthening Discovery's content pipeline across our linear and digital platforms around the world."

A designee of MHR Fund Management, MHR principal and investment committee member Emily Fine, also will join the Board.  Frank Giustra, who has served a total of 11 years on the Board, will step down.

"David and Mike are highly accomplished and respected executives who will bring added depth and vision to our Board of Directors," said Dr. Mark Rachesky, Chairman and largest shareholder of Lionsgate. "I was a very early believer in the value of content, and these new strategic relationships with two of the pre-eminent programming and distribution platforms in the world help position us to take the Company to the next level."

LionTree Advisors acted as exclusive financial advisor to Discovery and Liberty Global.