Lionsgate’s separation from Starz has been approved by a majority of its shareholders, TheWrap has learned, clearing the way for the Hollywood studio and the pay-TV network to give themselves more strategic flexibility.
Shareholders of record as of March 12 voted on the proposal during the company’s annual meeting on Wednesday. In addition, investors overwhelmingly approved the studio’s slate of board director nominees, as well as a proposal on executive compensation.
Lionsgate will file an SEC Form 8-K with the final vote totals with the U.S. Securities and Exchange Commission after the market closes today.
The separation of Starz and Lionsgate has been in the works for 3.5 years, but was delayed due to the Hollywood strikes, the company’s $375 million acquisition of eOne and regulatory approval from the SEC.
For Lionsgate, the split will position it strictly as a content studio that can focus on monetizing its library. Meanwhile, Starz will have more autonomy to explore distribution and bundling opportunities that may conflict with Lionsgate’s broader priorities. It may also be able to move more nimbly to consolidate niche streaming players aimed at female and underrepresented audiences, Starz’s core demographics. But it also makes Lionsgate and Starz, which have long felt they were undervalued by Wall Street in their combined form, more attractive to potential buyers.
“It’s a defensive and offensive play at once,” Alex Lubyansky, managing partner of merger and acquisition law firm Acquisition Stars, recently told TheWrap, citing the potential for a break-up premium. “Together, they were discounted for complexity. Separated, they’re more digestible for strategic buyers or public markets.”
Despite the separation, both companies will continue to benefit from their collaborations with each other.
Starz and Lionsgate recently extended a multi-year output deal through 2028 for the latter’s upcoming theatrical slate following the separation, which will continue to give the former exclusive rights in the first pay-television and SVOD windows on an accelerated basis closer to the initial theatrical release. Starz will also have an exclusive second window and third window. The deal gives Starz expanded access to nearly 20 of Lionsgate’s theatrical titles a year, such as the third installment of “Now You See Me,” “The Hunger Games: Sunrise on the Reaping” and “Ballerina.”
Additionally, Lionsgate Television will continue to have a close working relationship with Starz, producing premium TV series that are currently ongoing, such as the “Power” franchise and “BMF.” It will also have the option of licensing new series to Starz, similar to how it sells shows to other streaming platforms. Lionsgate’s recent TV projects include Apple TV+’s “The Studio,” Starz’s “Spartacus: House of Ashur,” USA’s “The Rainmaker,” which has been shooting in Ireland, MGM+’s “Robin Hood,” which has been shooting in Serbia and Netflix’s upcoming “Twilight” spinoff “Midnight Sun.”
The Starz split comes after Lionsgate launched the publicly-traded Lionsgate Studios via an SPAC deal with Screaming Eagle Acquisition Corp. in May of last year, which gave it an enterprise value of about $4.6 billion – $200 million more than what Lionsgate paid to acquire Starz in 2016.
It also comes as activist investor Anson Funds, which is a top five shareholder in Lionsgate Studios and who expressed support for the Starz split, has asked the company to consider a variety of strategic options, including a possible sale or divestitures of its unscripted television and 3 Arts businesses. It also called on the studio to improve their financial disclosures and pursue alternative revenue streams, such as merchandising and events like Broadway shows.
Following the separation, the newly named Starz Entertainment Corp. will trade under the ticker symbol STRZ on the NASDAQ in May. Lionsgate shares are down 27% in the past year and 6% year-to-date, but are up 7.4% in the past month.
