Lionsgate‘s long-gestating plan to split the studio with Starz is finally a go as the company announced today that Studios — the TV studio, motion picture group and film and television libraries — will merge with Screaming Eagle Acquisition Corp., a SPAC (special purpose acquisition company) led by Eli Baker.
The transaction values Lionsgate Studios at an enterprise value of approximately $4.6 billion (vs a current market cap for Lionsgate of $2.5 billion).
The separation is expected to close this spring turning Lionsgate Studios into one of the biggest global pure-play publicly-traded content companies and the hope is, an attractive acquisition target — adding more fuel to the media M&A chatter already in full swing. The Studios’ portfolio includes franchise properties The Hunger Games, John Wick, The Twilight Saga and Ghosts; a robust film and television production and distribution business; a leading talent management and production company; and a large film and television library that throws off significant cash.
Lionsgate has planned for nearly two years to separate the studio and Starz. CEO Jon Feltheimer in August anticipated the news coming in the first quarter of 2024. Market conditions were a factor, and the idea in any case was to wait until the company closed its acquisition of eOne from Hasbro, which will be announced next week.
The SPAC element is interesting. These are empty vessels that go public, raise cash and have two years to complete a merger with an actual company. SPACS trend in and out on Wall Street but Screaming Eagle has distinguished pedigree. Its chaired by Harry Sloan, a longtime media executive and current Lionsgate board member, who has stood up some of the earliest and most successful SPACs in media and entertainment in partnership with Jeff Sagansky and others. Saganksy is a Screaming Eagle director.
As a result of the transaction, 87.3% of the total shares of Lionsgate Studios are expected to continue to be held by Lionsgate, while Screaming Eagle public shareholders and founders and common equity financing investors are expected to own an aggregate of approximately 12.7% of the combined company.
Lionsgate Studios does not include the Starz platform, which will continue to be wholly owned by Lionsgate.
In addition to establishing Lionsgate Studios as a standalone publicly traded entity, the transaction is expected to deliver approximately $350 million of gross proceeds to Lionsgate, including $175 million in PIPE (private investment in public equity) financing already committed by leading mutual funds and other investors.
Net proceeds from the transaction are expected to be used to enhance Lionsgate’s balance sheet and facilitate strategic initiatives, including those related to the eOne business.
Common shares of Lionsgate Studios will trade separately from Lionsgate’s Class A (LGF.A) and Class B (LGF.B) common shares as a single class of stock.
The deal is subject to some closing conditions including regulatory approvals and approval from the shareholders and public warrant holders of Screaming Eagle.
“This transaction creates one of the world’s largest publicly-traded pure play content platforms with the ability to deliver significant incremental value to all of our stakeholders,” said said Feltheimer and Lionsgate Vice Chair Michael Burns.
“Coupled 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 slates, we’ve put together all of the pieces for a thriving standalone content company with a strong financial growth trajectory.”
“We are thrilled to be part of establishing Lionsgate Studios as one of the only pure play content companies in the public markets, which is well positioned to unlock value for both existing and new shareholders,” said Screaming Eagle CEO Eli Baker. “We believe this will be seen as one of the most innovative and value creating transactions the market has seen in some time.”
