John Malone joins Lionsgate board in Starz stock swap

John Malone joins Lionsgate board in Starz stock swap
Jennifer Lawrence in a scene from "The Hunger Games: Mockingjay Part 1." (Murray Close / Lionsgate)

Media mogul John Malone is getting into the "Hunger Games" business.

The billionaire media investor will join the board of Lionsgate, the film company behind the "Hunger Games" franchise, in a complicated deal that intertwines the Santa Monica-based movie studio and Malone's pay-TV channel Starz.


Lionsgate will exchange 3.4% of its outstanding common stock for a minority stake in Starz, in the deal that was announced early Wednesday. The swap will give Lionsgate 14.5% of the voting stock of Starz.

An analyst valued the stock-swap deal at about $140 million.

The deal makes sense, analysts said, as Starz is on the hunt for original programming for its premium TV channel and is looking to expand its online video service, StarzPlay. Lionsgate has a significant television studio, producing such hits as "Mad Men," and "Orange Is the New Black," and it could help feed the content pipeline for Starz.

"At first blush, this deal likely bodes well for Lionsgate's TV production segment as Starz has been ramping up its original programming slate," Benjamin Mogil, an analyst at Stifel, said in a note to clients.

Piper Jaffray analyst James Marsh (who covers Lionsgate's shares but not Starz's) wrote that linking with Malone could benefit Lionsgate as well.

Malone -- worth $7.4 billion, according to Forbes -- owns significant stakes in Liberty Interactive and Liberty Media, and Lionsgate could take advantage of his vast network.

"Lionsgate could benefit from strategic opportunities across the broader Malone 'family,'" Marsh said. "While details are still sparse, we like what we see so far from the deal."

Investors also welcomed the agreement.

Shares of Lionsgate rose the most in two years after the deal was announced, surging 9.2% to $32.42 a share in midday trading on Wall Street. Starz's stock advanced about 3% to $31.60.

Starz has a complicated stock structure that has limited its ability to attract new investors.

The company has been looking for a change in ownership as the media landscape has gotten more crowded and competitive. Last year, it held talks with Rupert Murdoch's 21st Century Fox, but no deal materialized.

Liberty Media Corp. in January 2013 spun off Starz and Encore into a separate publicly traded company. The spinoff, orchestrated by Malone, was intended to streamline his company's businesses and make it more easily digestible for a media or technology company that might want to acquire it.

It was unclear whether the move represents the first step in Lionsgate acquiring Starz -- or if Malone simply wanted to spread his bets between the two companies.

Starz competes with such juggernauts as HBO and Showtime as well as new entrants into the space, including online video streaming services Netflix and


Lionsgate is also an equity partner in Epix, which is a competing movie service to Starz. Epix, also owned by Viacom and MGM, has been successful in recent years in expanding its distribution with pay-TV companies.

Malone will remain the largest voting shareholder of Starz with approximately 32% of the vote, the companies said in a statement, and he will join Lionsgate's board of directors.

"John has been a pioneer in content distribution to the next generation consumer, and we're delighted to add an investor of his caliber, experience and vision to our Board of Directors," Lionsgate Chief Executive Jon Feltheimer and Vice Chairman Michael Burns said in a joint statement. "We see tremendous value in Starz as well as the potential to explore a broad range of strategic initiatives in the future."