Lions Gate Entertainment Corp. (NYSE: LGF)
Lionsgate Entertainment has had a rough time over the past year. Unfortunately, the company’s films simply haven’t been doing well at the box office. Nonetheless, there’s renewed excitement surrounding the stock today based on acquisition plans that were announced early this morning. Today, we’ll talk about the acquisition, how the market is reacting to the news, and what we can expect to see from LGF moving forward.
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LGF To Acquire STRZA
As mentioned above, investors are excited about Lionsgate today, and for good reason. Early this morning the company announced that it would be acquiring Starz (NASDAQ: STRZA). The acquisition will be a mix of both cash and stock, with a total value of $4.4 billion.
Under the terms of the agreement, LGF will be reclassifying its shares. Each outstanding share of the stock will be split into half shares. One half of each share will be a voting share while the other half will be a newly created non-voting share.
The breakdown of the acquisition is relatively simple. Investors who hold Starz Series A common stock will receive $18.00 cash. On top of the cash payment, they will also receive 0.6784 shares of LGF non-voting shares. As of the latest closing price, the acquisition comes to a total of $32.73 per share, representing an 18% premium.
This is a great deal for Lionsgate. When it comes to acquisitions, premiums tend to be a bit higher. So, it can be said that the company actually received a bit of a discount. Through the acquisition, the company plans to create a global content powerhouse that is already well-positioned to capitalize on growth opportunities around the world.
Following the release of the news, the CEO’s of both companies offered incredibly positive statements. Here’s what they had to say:
“This transaction unites two companies with strong brands, complementary assets and leading positions within our industry… We expect the acquisition to be highly accretive, generate significant synergies and create a whole that is greater than the sum of its parts. Chris Albrecht and his team have built a world-class platform and programming leader, and we’re proud to marshal our resources in a deal that accelerates our growth and diversification, generates exciting new strategic content opportunities and creates significant value for our shareholders.” – Jon Feltheimer, CEO of LGF
“Jon, Michael and the rest of the Lionsgate team have built the first major new Hollywood studio in decades, and we’re thrilled to join with them in a transaction that multiplies the strengths of our respective businesses… Our similar entrepreneurial cultures and shared vision of the future will make this alliance an incredible fit that creates tremendous value for our shareholders, great content for our audiences and limitless opportunities for our newly-combined company. I am very appreciative of the work, passion and dedication of both of our companies’ employees and more enthusiastic than ever about the future of our business.” – Chris Albrecht, STRZA CEO
How The Market Reacted To The News
As investors, one of the first things that we learn is that the news causes movement in the market. Any time there is positive news released with regard to a publicly-traded company, we can expect to see gains in the value of the stock associated with that company. In this particular case, the news was overwhelmingly positive. Not only did LGF negotiate an incredible premium, the acquisition of Starz will position the company for strong revenue and great content creation in the future. As a result, we’re seeing strong movement in the value of the stock today. Currently (10:46), the stock is trading at $21.46 per share after a gain of $0.52 per share, or 2.48%, thus far today.
What We Can Expect To See Moving Forward
Moving forward I have an overwhelmingly bullish opinion of what we can expect to see from LGF. Due to poor recent performance at the box office, the stock is trading at a bargain at the moment, if you ask me. Now, combining the efforts of Lionsgate and Starz, the company will likely soar as it becomes a global entertainment powerhouse. All in all, things are looking great for LGF.
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What Do You Think?
Where do you think LGF is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!
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