Lionsgate Shareholders Approve Starz Split

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 8-K with the final vote totals with the U.S. Securities and Exchange Commission after the market close.

The separation of Starz and Lionsgate has been in the works for three and a half 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.”

The Starz split comes after Lionsgate launched the publicly-traded Lionsgate Studios via a 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 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.

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