Starz, the premium cable channel owned by Lionsgate Entertainment Corp., may become it’s own separate company according to a report by the Wall Street Journal. Lionsgate is said to be considering this move in an effort to allow shareholders to invest directly into one business or the other, along with reducing the parent company’s nearly $2.9 billion in debt.
Separating into two companies would mean Starz would take on a large amount of Lionsgate’s debt as a special-purpose acquisition company, or SPAC. By definition, a SPAC is a type of investment fund that allows public stock market investors to invest in private equity-type transactions with the purpose of acquiring an asset.
According to the WSJ, Lionsgate has been considering this more seriously in recent months as more investors have been approaching them about spinning off Starz into it’s own entity. Over the summer, DirecTV started paying Lionsgate less for rights to carry Starz and Encore, and Comcast is considering dropping both channels from it’s premium packages altogether. Their contract expires at the end of the year, so if they didn’t renew with Lionsgate, Comcast subscribers would have to add Starz and Encore as a la Carte channels.
Lionsgate has had a bit of a rocky time recently, including giving CBS 50% stake and full control of it’s cable network Pop. Pop has been hurting for viewers as cord cutting continues to rise. There was also talk of Lionsgate selling off Starz to CBS, or even Hasbro a few years ago, but nothing came of it. Lionsgate’s stock has also fallen significantly in recent years, once trading at more than $30, but on Tuesday it closed at just $8.46.
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