Malone, Lionsgate in Stock Swap

Liberty Media chairman John Malone has reached a deal with Lionsgate, swapping a 4.5% interest in premium channel Starz for a 3.4% stake in the movie studio and production company. The deal also gives Malone  a seat on the studio's board of directors.   

Under terms of the deal, Lionsgate will issue newly issued shares representing about 3.43% of its outstanding common stock on a pro forma basis for a portion of Series A and Series B Starz common stock held by Dr. Malone and his affiliates representing approximately 4.51% of Starz common stock outstanding and 14.50% of the total voting power of Starz common stock. Dr. Malone will remain Starz's largest voting shareholder, with an approximate 6.1% equity interest and approximately 32.1% of the total voting power of Starz. Upon completion of the transaction, Dr. Malone will join Lionsgate's Board of Directors.

“Lionsgate has emerged as a leader in developing global content, and this transaction creates the potential for a number of strategic opportunities around the world with them,” Malone said in a statement. “I’m delighted to add my voice to the Board of Directors of one of the most exciting content companies in the industry.”

In addition to its movie studio, most well-known for horror films like the Saw series and teen blockbusters like The Hunger Games franchise and Ender’s Game, Lionsgate also is one of the leading production companies for cable, producing such hits as Mad Men, Weeds and Nurse Jackie. Most recently the studio has produced the hit series Orange is the New Black for Netflix.

“We look forward to welcoming John to our Board of Directors and working together to create additional shareholder value,” Lionsgate Chairman Mark Rachesky said in a statement.  “Now that Lionsgate has grown into an industry leader, we are excited to take the company to the next level as we continue to exploit the robust global demand for content.”

Malone was an early backer of Starz and has hinted after the premium channel spun off from Liberty Media in 2013 that it could use a “big brother,” in the form of a partner or outright buyer.  Starz has entertained some initial interest but hasn’t landed a solid suitor.

“John has been a pioneer in content distribution to the next generation consumer, and we’re delighted to add an investor of his caliber, experience and vision to our Board of Directors,” Lionsgate Chief Executive Officer Jon Feltheimer and Vice Chairman Michael Burns said in a statement. “We see tremendous value in Starz as well as the potential to explore a broad range of strategic initiatives in the future.”

One of those initiatives has been a big push into original programming. Since hiring former Home Box Office CEO Chris Albrecht in 2009,  Starz has spent heavily on originals and has gained some buzz, especially around series like Outlander and Black Sails.

 “Lionsgate has been a great partner for us on projects in the past,” Albrecht said in a statement. “We have tremendous respect for the business they have built and their leadership position in the entertainment industry. We’re pleased that they will be joining Dr. Malone as shareholders who support our vision.”

The transaction is subject to customary closing conditions, including the condition that all waiting periods applicable to consummation of the exchange under the HSR Act shall have expired or been terminated.