Lionsgate on Thursday announced on its earnings call that it was exploring strategic options for its Starz unit.
Those options would include a potential sale, a spinoff or bringing in a minority partner.
“The thinking is that motion picture plus TV isn’t getting a proper valuation,” said analyst Steven Cahall of Wells Fargo. Cahall said the Starz library is worth about $800 million annually. “Somewhere in the combo of Lionsgate assets value is getting lost.”
On the earnings call, Michael Burns, Lionsgate’s COO, said the company’s board authorized the exploration of alternatives for Starz.
“While we continue to realize substantial synergies from bringing Lionsgate and Starz together. We also see the opportunity to potentially unlock significant shareholder value under a scenario where investors had the ability to value our studio assets and Starz separately,” he said “Recent transaction multiples in the media space give us confidence that exploring alternate paths is prudent. Additionally, we believe that a number of the structures we're considering will also allow Lionsgate and Starz to preserve many of the operational benefits we're currently achieving within a single corporate structure.”
Lionsgate acquired Starz for $4.4 billion in 2016. The enterprise value of Lionsgate now is about $6 billion, Cahall estimated.
On its earnings call, Lionsgate said that Starz had 20.6 million subscribers, up 500,000.
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