Lionsgate spins $4.6 billion SPAC merger

Lionsgate CEO John Feltheimer

Getty Images

In a move that has been telegraphed for some time, Lionsgate has unveiled a deal to spin off its studio business in a special purpose acquisition company (SPAC) deal to create a separately traded public company with an enterprise value of $4.6 billion.

The proposed SPAC-style merger follows strategic talks by the John Feltheimer-led company to spin off its studio division or streaming platform Starz. The studio’s business, which includes Lionsgate’s television production divisions, Lionsgate’s motion picture group and a 20,000-title film and television library, will be combined with Screaming Eagle Acquisition Corp., a special purpose acquisition rights company — often referred to as a blank check company — led by SPAC sponsor Eagle Equity Partners and CEO Eli Becker.

The newly combined entity, Lionsgate Studios Corp., will serve as a publicly traded vehicle able to raise new capital and merge with existing companies. Arguably its biggest asset is its extensive library of movies and TV franchises. Rosenblatt Securities placed a $5.2 billion value on Lionsgate’s library in May, meaning it’s worth more than the entire studio’s current valuation.

The media networks business, which mostly includes Starz and its 28 million global subscribers, will remain in the current publicly traded company.

the hunger Games And John Wick The studio is betting that creating two independent companies by launching a new public company from an existing public company could help Starz and the studio’s assets be valued separately and more generously. The use of a SPAC as a corporate carve-out is also seen as a step toward finally separating the studio and Starz divisions by creating an independent, stand-alone, publicly traded company. The deal will also allow Lionsgate to maintain an attractive capital structure and control of the studio’s business, and is expected to allow the parent company to eventually perform a full-fledged offering.

“This transaction creates one of the largest independent content platforms in the world with the ability to deliver significant additional value to all of our stakeholders,” Lionsgate CEO John Feltheimer and Vice President Michael Burns said in a statement about potentially better quantifying current value. Future growth prospects of the Hollywood studio.

“Combined with the acquisition of the eOne platform scheduled to close next week, the expansion of our partnership with 3 Arts and the strong performance of our content rosters, we have put together all the pieces for a thriving independent content company with a strong financial growth trajectory,” the statement added.

Lionsgate has acquired certain Entertainment One assets from Hasbro, and the Hollywood studio also appears set to take a larger, unspecified majority stake in production and management company 3 Arts Entertainment. The Hollywood studio, in a filing with the Securities and Exchange Commission, pegged the value of the eOne deal at $375 million, excluding transaction and relocation expenses.

That’s less than the $500 million price Lionsgate paid for eOne that was revealed in August 2023, and significantly less than the $4 billion Hasbro originally paid for the independent Canadian studio in 2019.

The deal separating Lionsgate’s studio businesses from Starz has been in the works for some time and was postponed to 2024 after the company revealed it was acquiring producer eOne, which has backed series like Rookie, Yellow Jackets And Naked and afraid.

An estimated 87.3 percent of Lionsgate Studios’ available shares will continue to be held indirectly by its parent company, Lionsgate, while Screaming Eagle’s public shareholders (including Eagle Equity Partners, SPAC shareholders and institutional investors) are slated to own approximately 12.7 percent of the company’s shares directly. Joint company. Lionsgate Studios common stock will trade separately from the Class A and Class B stock of parent Lionsgate.

Lionsgate Studios will also operate separately from Starz, the premium streaming and cable platform that will remain owned and operated by parent company Lionsgate. The SPAC deal is expected to generate approximately $350 million in gross proceeds for Lionsgate, including $175 million in financing already committed by institutional investors.

Lionsgate will use the proceeds to strengthen its balance sheet and complete strategic initiatives such as the acquisition of Entertainment One, which is scheduled to close by the end of the year. The SPAC deal, subject to shareholder and regulatory approvals, is expected to close in the spring of 2024.

Lionsgate senior management will hold an analyst call to discuss the deal on January 1. 4.