Lionsgate looks to spin off studio, instead of Starz

The much ballyhooed marriage between Lionsgate and Starz may not last much longer — at least in its current form.

After months of talks over separating its businesses, Santa Monica-based Lionsgate Entertainment told investors that it has decided to focus on spinning off the studio behind the “Hunger Games” movie franchise instead of its Starz cable network.

The decision comes after months of talks to sell a stake in Starz, producer of shows such as “Outlander” and “Power,” as a way to boost the valuation of the company.

Instead, Lionsgate said it now plans to hold onto Starz and spin off its film and TV studio into a separate company, according to a regulatory filing. It also revealed that it will rebrand Starzplay, its international streaming platform, as Lionsgate+.

Lionsgate, which acquired Starz in 2016 for $4.4 billion, would still retain the majority of shares in the new entity.

“We have increased our focus on the possibility of spinning our studio business, creating a number of financial and strategic benefits,” the company said. “We are continuing productive negotiations with prospective strategic and financial partners on both sides of our business.”

Investors appeared to welcome the move, which could spur further consolidation in Hollywood. Lionsgate shares rose 2.21% to $8.33 on the news Wednesday.

The studio, known for such hit films as “Knives Out” and the “John Wick” series, has long been the subject of takeover speculation as media giants such as Walt Disney Co. bulked up. Lionsgate is one of the last independent studios in Hollywood.

However, some analysts said the current belt-tightening among streaming companies such as Netflix and HBO Max, could make it harder for Lionsgate to attract investors.

“The company needs to find an external buyer who will put actual capital up for one or both assets,” said Doug Creutz, analyst at Cowen & Co. “While current market conditions are undoubtedly hindering this process, we also think the strategic rethink that is going on about content spending at some [if not all] large streaming services may also be a negative factor weighing on potential valuation.”

Lionsgate first announced plans to potentially spin off one of its core businesses last year because it felt the market undervalued the combined entity.

The studio, which has a deep library of 17,000 titles, could be attractive to anyone looking to beef up their production offerings in an already competitive landscape for streaming platforms.

Earlier this year, Amazon closed an $8.5-billion acquisition of Metro Goldwyn Mayer, giving the maker of the “Rings of Power” series control of the James Bond movies and “Rocky” franchises, plus such classics as “The Silence of the Lambs.”

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