Lionsgate a prime target for media M&A takeovers – Deadline

Lionsgate CEO Jon Feltheimer said on Thursday that two media merger deals in as many weeks were “a resounding affirmation of the value of content, intellectual property and brands,” but the company wanted to keep its head down and “do not be distracted by this concept of scale. . “

“Obviously we’ll talk to everyone, we’ll listen to everything,” he said on a conference call following strong quarterly results – even though Lionsgate is seen as the most likely to recover then if, or, more likely, like, a wave of industry consolidation continues.

The company’s shares reflect this, along with solid growth in Starz subscribers and its entire portfolio. The share has risen steadily since AT&T announced plans to get rid of WarnerMedia in a $ 43 billion deal with Discovery and thanks to yesterday’s news that Amazon will be acquiring MGM for 8, $ 45 billion. Lionsgate shares today closed 1.3% higher at $ 18.66 today and are up another 2% late in trading after profits.

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“Mergers happen in waves. There have been constant waves. The waves are separate from father and mother, but they get bigger and bigger as there are fewer and fewer companies, ”said Neil Begley, SVP of Moody’s Investor Services, who has been monitoring the industry since the 1980s. “Lionsgate is a lot like MGM. It owns one of the leading libraries’ with franchises including Seen, Hunger games and John wick.

Amazon CEO Jeff Bezos said his deal was simply a function of “MGM’s vast and rich catalog of highly regarded intellectual property.” Amazon will use the content to power Amazon Prime Video, which in turn powers the Amazon Prime engine.

In AT&T’s case, the telecommunications company, which has to spend tens of billions of dollars on spectrum and deploy 5G, has been hesitant to invest in the content needed to make HBO Max competitive.

Together, the deals reflect a change in the competitive landscape, in this case a pivot to streaming. Similar changes have resulted in waves of deals since Sony bought Columbia Pictures in 1989 and Matsushita bought MCA / Universal in 1991. Both were hardware companies looking to get into software. One deal lasted, another didn’t.

Today, “everyone has realized that they need to get bigger in streaming, so they need content,” said Alan Gould of Loop Capital. And they need more content, even if less and less is available, as studios are keeping it or grabbing it ASAP to feed sister streamers.

NBCUniversal’s parent company, Comcast, also reportedly courted MGM, but pulled out when the price rose from around $ 6 billion to over $ 8 billion. It’s ironic because Comcast has a history with MGM. She acquired the studio with Sony and several private equity firms in 2004 from then-owner Kirk Kerkorian, producer Frank Mancuso and Australian network Seven Network. MGM, which previously had half a dozen owners, was over-leveraged and filed for bankruptcy in 2010.

“Comcast could have stepped up, tried to turn the tide,” Begley said. In all fairness, although Netflix did start, streaming wasn’t a big thing back then. Traditional media wouldn’t work for another decade.

The high price Amazon has paid, as everyone has pointed out, is because it uses a different calculation called Prime. (Apple also released studio tires on behalf of Apple TV +.)

Gould called Lionsgate so appealing to potential buyers because it’s a “free radical” and digestible size. He estimates it would be worth at least $ 8 billion, or $ 31 per share. He owns a 17,000 title library, Starz, and is a leading independent producer.

In a note earlier this week, he valued Starz at $ 5.9 billion and traditional film and television companies at $ 5.1 billion (the $ 8 billion comes after subtracting overhead and debt. ).

Lionsgate is also not burdened with basic cable networks, which some see as a liability for another free radical, AMC Networks.

As it grows, Loop attributes ViacomCBS an enterprise value of $ 42 billion, which makes it harder to swallow. It could be a buyer or merge with another like NBCUniversal. The Wall Streeters noted significant antitrust issues in this case which would need to be addressed since the merged entity would own two broadcast networks.

What do the few companies in the mix say?

Sony Corp. has come under intermittent pressure over the years to sell his studio. CEO Yoshida Kenichrio told the Financial Times this week it will not be.

Comcast CFO Mike Cavanaugh told investors at a virtual media conference on Wednesday when Amazon-MGM was down that “it’s our job to consider whatever could be possible to be smart. and add value. [but] we like the assets we have. “

“Obviously people are talking about scale in the media business these days … but I think what’s underestimated is execution,” he said, ” and we feel very good about it. “

Disney CEO Bob Chapek and ViacomCBS CFO Naveen Chopra said at the same conference (an event hosted by JP Morgan) on Monday that they are focused on growing their respective businesses, satisfied with their competitive position and did not need agreements.

Disney has already smartly expanded with Pixar, Lucasfilm, and Marvel and topped that off by purchasing Fox’s entertainment assets. Disney + is also ahead of the new generation of streamers.

Begley of Moody’s noted that the deals with ViacomCBS, Comcast and AMC Networks should all be “friendly” as they are companies controlled (respectively by Redstones, Roberts and Dolans).

Lionsgate does not have a majority shareholder. The new combined WarnerMedia-Discovery won’t be either when it is expected to close in the middle of next year.

FOUR DECADES OF MEDIA BUSINESS

80 years

1986 – Capital Cities buys ABC

1989 – Sony buys Columbia Pictures

90s

1990 – Warner Communications and Time merge

1991 – Matsushita purchases Universal Parent MCA

1994 – Viacom acquires Paramount

1994 – Viacom buys Blockbuster

1995 – Seagram buys Universal / MCA from Matsushita

1995 – Westinghouse buys CBS

1996 – Disney buys Capitals / ABC

1996 – Time Warner and Turner Broadcasting merge

1997 – Westinghouse sells power and light bulb business and changes name to CBS

1998- AT&T purchases the TCI cable from John Malone

1999 – Viacom buys CBS

2000s

2000 – AOL buys Time Warner

2001 – Vivendi acquires Seagram

2001 – Vivendi acquires the American networks from Barry Diller

2001 – Comcast buys AT&T Broadband

2003 – Vivendi creates NBCUniversal by combining the studio with GE’s TV business run by NBC

2004 – Comcast unsuccessfully attempts to buy Disney

2011 – Comcast buys 51% of NBCUniversal

2013 – Comcast buys the rest of NBCUniversal

2014 – AT&T acquires DirecTV

2015 – Charter acquires Time Warner Cable

2017 – Disney acquires Fox (outbid Comcast, which buys Sky)

2018 – AT&T acquires Time Warner

2021 – AT&T sells part of DirecTV

2021- AT&T sells WarnerMedia

2021 – Amazon buys MGM


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