In a surprise move, Lionsgate Entertainment Corp. agreed Monday to buy TV Guide Network and TVGuide.com for $255 million, torpedoing a deal announced just over two weeks ago with media entrepreneur Allen Shapiro and a private equity unit of JPMorgan Chase & Co.
The purchase from Macrovision Solutions Corp. is expected to significantly expand Lionsgate’s cable holdings and reach, giving the Santa Monica studio one of the most widely distributed cable networks in the United States.
The TV Guide Network is available in 83 million homes and has an established brand name, yet previous owners including Rupert Murdoch’s News Corp. failed to make it a major player.
Showbiz news is dominated by rival channels such as E Entertainment and syndicated programs such as “Entertainment Tonight” and “Access Hollywood.”
Lionsgate Chief Executive Jon Feltheimer has plans to change all that.
“We want to turn this into a billion-dollar asset,” said Feltheimer, whose movie and television studio produces the “Saw” and “Tyler Perry” movie franchises and the popular TV series “Mad Men” and “Weeds,” among others.
“Within the next couple of years we expect to be a full- service and full-screen entertainment-focused channel,” Feltheimer added. “It’s a great fit.”
He said Lionsgate planned to expand the channel’s programming with original shows, behind-the-scenes movie coverage and other offerings, gradually moving it away from the scrolling grid of show listings that is now its most dominant feature.
In the near term, Lionsgate will be able to immediately use the channel to promote its upcoming movies, which include the romantic comedy “New in Town,” starring Renee Zellweger and hitting theaters Jan. 30.
Feltheimer said that one of the most appealing elements of TV Guide is the opportunity to tap into a demographic -- women in their early 40s -- that Lionsgate is not serving with its other cable holdings.
These include FEARnet, a video-on-demand and Internet horror channel that it owns with Sony Corp. and Comcast Corp., and the young men’s digital distribution platform Break.com (Lionsgate owns 42%).
It is also planning a movie channel, Epix, with partners Viacom Inc. and Metro-Goldwyn-Mayer Inc.
TV Guide Network President Ryan O’Hara said he extended his contract to be able to work with Lionsgate to improve the channel.
Feltheimer said that Lionsgate would fund the acquisition primarily from existing cash and would supplement it with available funds from its $340- million credit facility. Lionsgate reported $249 million in cash as of Sept. 30.
Lionsgate had been eyeing the TV Guide assets for the last three months. Feltheimer said his company pounced quickly after learning that the deal with Shapiro and One Equity Partners, which manages $8 billion in investments for JPMorgan Chase, wasn’t yet firm.
“We moved fast and came in and gave Macrovision more certainty of closure,” he said.
Macrovision said it had the right to shop the deal with the Shapiro group until it closed at the end of March.
The agreement with Lionsgate is expected to close Feb. 28.
A spokesman for Santa Clara, Calif.-based Macrovision said the Lionsgate offer was more attractive even though the purchase price was essentially the same.
“This transaction with Lionsgate gave us the best possible and fastest close and we were happy with the price and the other terms,” said Corey Ferengul, Macrovision’s executive vice president of marketing.
Unlike the Lionsgate pact, the Shapiro deal was weighed down by various performance contingencies.
Shapiro said his group was taken by surprise when Macrovision informed it of the new deal Monday.
“I think this clearly indicates what a good asset this was,” said Shapiro, adding, “it remains to be seen if the final chapter is written yet.”
Greg O’Hara of One Equity said, “Our plan is to continue backing Allen Shapiro and his excellent management team in purchasing other entertainment and media assets.”
Shares of Lionsgate, which is incorporated in North Vancouver, Canada, fell 19 cents to $5.61. Macrovision shares declined 38 cents to $12.95.