Lionsgate Expects Starz Sale Or Spinoff By Summer's End

Lionsgate now expects to announce a sale or spin-off deal for Starz by the end of this summer, CEO Jon Feltheimer said during a first-quarter earnings call on Thursday.

“We are engaged in a robust and productive process with our bankers and a number of potential strategic and financial partners,” Feltheimer said, noting that summer's end appears realistic despite the current stock market decline and disruptive business environment. 

Starz may have more latitude to explore some strategic opportunities once it is no longer wholly owned by Lionsgate, he said — adding that it’s likely, but not certain, that Lionsgate will retain some stake in the company.

While the studio and Starz are expected to become separate companies, “Even after executing our strategic plan for Starz, we will continue to partner with them in the creation of great IP, building our library and achieving important synergies between Starz and our studio business," Feltheimer said.

Feltheimer did not name prospective buyers for Starz, which Lionsgate acquired for $4.4 billion in 2016, but the Wall Street Journal recently reported that Roku and private equity firm Apollo Global Management are making a joint bid for a stake in the cable channel and streaming company.

In April, Lionsgate and The Roku Channel closed a multi-year output deal for Lionsgate theatrical movies -- a package that includes the “John Wick” franchise, “Expendables 4” and “Borderlands.”

News of the Roku/Apollo interest came after an initial round of bidding, which reportedly included DirecTV.

Starz continued to see strong growth during the quarter, with streaming subscribers up 4.8 million, or 47%, year-over-year, to total 24.5 million.

Lionsgate reported that Starz’s total worldwide streaming and cable TV subscribers rose 21%, to 35.8 million, in Q1, and affirmed its earlier projection that total subscribers will hit 50 million to 60 million by the end of fiscal 2025.

Lionsgate missed analysts’ sales and earnings expectations for the first quarter.

Lionsgate’s revenue rose 6% YoY, to $929.9 million, in Q1, but its net loss doubled to $104.6 million, and its operating profit loss rose to $50.4 million from $14.3 million in the year-ago period.

Adjusted net income came in at $13 million, or 6 cents per adjusted earnings per share (EPS).

Analysts had expected $961 million in revenue and adjusted EPS of 10 cents, per S&P Global Market Intelligence.

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