Lionsgate takes big step to split Studio & Starz

Lionsgate is moving forward with its plans to separate Starz’s studio operations, filing a draft filing with the SEC for the studio’s proposed spin-off.

The application was submitted confidentially, so there are no details. However, Lionsgate said it expects the spin-off to close “on previously communicated timelines, subject to market conditions and other conditions.” This means the term ends in September. Details of the spider are likely to be revealed in the coming months. The company previously said it would file its plans with the SEC in March, so today’s news is on the agenda.

Wall Street has been anticipating the deal for more than a year. It is intended to unlock value for the inventory that is left behind, along with the rest of the media. This year, Lionsgate shares have been among the industry’s best performers, doubling since January but still below a 52-week high of nearly $17.

“When you have two very different companies, it’s difficult to use a blended multiple to show shareholders the value of both sides of the company. Divorce is the cleanest way to do it,” Vice President Michael Burns said during a media conference last fall.

A standalone Starz media group would have its own currency, meaning it could use stock “to get bigger or be part of something bigger,” Starz CEO Jeffrey Hirsch said at the time. “Do I think we can continue to be successful at our size?” Yes, he said, “but it’s a tough environment out there.”

The same applies to the studio and its library of around 18,000 titles compiled over the years by Jon Feltheimer and Burns, CEO of Lionsgate. Post-spin, Lionsgate will be one of the few pure-play, publicly traded content companies at a time when content is in high demand.

Shares are up 5.2% today to close at $11.07. They are down 0.6% in after-hours trade.