Lionsgate-Starz Separation Greenlit by Supreme Court of British Columbia

Lionsgate Entertainment’s studio and Starz businesses have officially received the green light from the Supreme Court of British Columbia to separate into two independent, publicly traded companies.

The formal separation will take place on Tuesday, with Lionsgate expected to begin trading on the New York Stock Exchange under the ticker symbol LION starting Wednesday. Meanwhile, Starz will trade under the ticker symbol STRZ.

Per an 8-K filed with the U.S. Securities and Exchange Commission, the split received approval from approximately 99% of Class A and B shareholders eligible to vote. As part of the separation, shareholders also overwhelmingly approved collapsing Lionsgate’s dual class stock structure.

Approximately 99% of shareholders also approved a 15-to-1 reverse stock split of Starz Entertainment Corp., which would consolidate every 15 shares of common stock into one in order to reduce its total number of shares outstanding.

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.

Additionally, it makes Lionsgate and Starz, which have long felt they were undervalued by Wall Street in their combined form, more attractive to potential buyers.

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” spin-off “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 its financial disclosures and pursue alternative revenue streams, such as merchandising and events like Broadway shows.

Lionsgate stock has fallen 26% in the past year and 3.6% year to date, but is up 5.3% in the past six months.

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