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Lionsgate said to be close to Starz deal – again

June 29, 2016

After months of on-again-off-again talks, movie studio Lionsgate appears to finally be closing in on a deal to merge with premium cable network Starz.

Lionsgate, the Santa Monica entertainment company behind the “Hunger Games” movies and the Netflix TV series “Orange Is the New Black,” is nearing a deal to buy the Englewood, Colo.-based company, according to two people familiar with the matter.

The talks are in advanced stages and could be announced soon, said the people, who did not want to be identified speaking about private discussions. 

Representatives of Lionsgate and Starz declined to comment.

Lionsgate is one of the only remaining publicly traded studios that isn’t part of a larger conglomerate. NBCUniversal recently agreed to buy DreamWorks Animation for $3.8 billion.

Speculation about a possible union between the two media companies has long swirled among investors. The Los Angeles Times reported last year that the companies had held high-level talks about combining. 

Media mogul John Malone — considered one of the architects of the modern cable TV business — early last year acquired a 3.4% stake in Lionsgate through a stock swap with Starz, a move that was widely interpreted as foreshadowing a merger. Malone has been a major proponent of media consolidation. 

Lionsgate said in a regulatory filing earlier this year that it formally intended to explore a deal. However, those talks appeared to slow after Lionsgate’s stock fell significantly because of a worse-than-expected earnings report.

Terms of a potential sale were not clear and negotiations could still fall apart. Bloomberg News reported that a transaction would value Starz at $30 a share. The firm’s stock closed Wednesday at $28.25, putting the company’s market value at $2.8 billion. 

Starz shares surged 9% in after-hours trading after Bloomberg reported that an agreement could be announced within the next few days. Lionsgate shares jumped 8% in after-hours trading. They closed Wednesday at $20.94, up 4%.

Analysts have long pointed to the possible benefits of uniting the two media firms. 

A merger could better position the companies to compete amid broader consolidation in the entertainment industry, especially given the unpredictable nature of the movie business. 

Starz boasts 24 million subscribers in the United States and its companion brand, Starz Encore, has 32 million subscribers. Starz’s popular programming includes “Outlander” and “Power.”

The cable channels would provide another outlet for Lionsgate’s growing TV business. Starz could eventually gain access to the big studio content that Lionsgate makes. The studio has released some of Hollywood’s most successful franchises, notably the “Hunger Games” and “Twilight” films, but has also suffered recent bombs such as “Gods of Egypt.”

Lionsgate has high hopes for its planned “Power Rangers” movies, which Chief Executive Jon Feltheimer recently said could launch as many as seven films.

This week, Starz Chief Executive Chris Albrecht signed a new contract extending his employment through 2020. The new 4 1/2-year deal becomes effective on Friday, and provides Albrecht with the additional title of president.

Times staff writer Meg James contributed to this report.

Twitter: @rfaughnder

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