SCHEDULE 13D/A: Lions Gate Entertainment Details Strategic Separation of Studios and Starz Businesses, Outlining New Governance and Shareholder Agreements

Sentiment:

Corporate Restructuring Update 29 January 2025 10:26 PM

Lions Gate Entertainment Corp. has filed an amendment detailing its plan to separate its Studios and Starz businesses into two distinct publicly traded companies, outlining new investor rights, voting, and registration agreements for key shareholders including Liberty Global, MHR, and Discovery.

Summary

Lions Gate Entertainment Corp. (the "Issuer") intends to implement a plan of arrangement to separate its Studios Business from its Starz Business.
Upon completion of the Separation Transactions, pre-transaction shareholders of the Issuer will own shares in two separately traded public companies: Starz Entertainment Corp. (holding the Starz Business) and New Lionsgate (renamed Lionsgate Studios Corp., holding the Studios Business).
For each Class A Voting Share, shareholders will initially receive one New Lionsgate Class A Share and one New Lionsgate Class C Preferred Share.
For each Class B Non-Voting Share, shareholders will initially receive one New Lionsgate Class B Share and one New Lionsgate Class C Preferred Share.
Subsequently, for each New Lionsgate Class A Share (and related Class C Preferred Share), shareholders will receive 1.12 New Lionsgate Common Shares and 1.12 Starz Common Shares.
For each New Lionsgate Class B Share (and related Class C Preferred Share), shareholders will receive 1 New Lionsgate Common Share and 1 Starz Common Share.
Liberty Global Ltd. and its subsidiary Liberty Global Ventures Limited (LGVL) beneficially own 4,049,972 Class A Voting Shares, representing 4.8% of the total 83,691,063 Voting Shares outstanding as of January 17, 2025.
Liberty Global and LGVL may be deemed to beneficially own additional shares held by MHR Fund Management LLC (20,233,455 Voting Shares or 24.2%) and Warner Bros. Discovery, Inc. (2,500,000 Voting Shares or 3.0%) due to existing agreements.
New Investor Rights, Voting, and Registration Rights Agreements will be established for both New Lionsgate and Starz, involving Liberty Global, MHR, and Discovery, defining board nomination rights, voting obligations, and share transfer provisions.
Existing Investor Rights, Voting and Standstill, and Registration Rights Agreements will terminate upon the execution of the new agreements.

Sentiment

Score: 7

Explanation: The document details a significant corporate restructuring aimed at separating two distinct business units, which often leads to increased transparency and potential for focused growth. The detailed governance agreements provide clarity for major shareholders, suggesting a well-planned strategic move.

Positives

The separation is expected to create two distinct publicly traded companies, potentially allowing for more focused management and strategic clarity for each business segment (Studios and Starz).
New governance agreements provide clear frameworks for board representation and voting rights for major shareholders like Liberty Global, MHR, and Discovery in both post-separation entities.
The establishment of separate entities may unlock shareholder value by allowing investors to allocate capital based on their preference for content production versus subscription streaming businesses.

Negatives

The separation transactions are subject to approval by the Issuer's shareholders, introducing a contingency that could prevent the plan from proceeding.
The complexity of the share exchange and the creation of new share classes could be challenging for some investors to fully comprehend.
The detailed voting agreements, while providing clarity, also indicate significant control and influence by a few major shareholders over the future direction of both companies.

Risks

The Separation Transactions are contingent on approval by the Issuer's shareholders, and there is a risk that this approval may not be obtained.

Future Outlook

Lions Gate Entertainment Corp. intends to proceed with a strategic plan of arrangement to separate its Studios and Starz businesses into two distinct publicly traded companies, Starz Entertainment Corp. and Lionsgate Studios Corp., subject to shareholder approval. This will result in current shareholders receiving shares in both new entities, with new governance and shareholder agreements defining future relationships and control.

Industry Context

The proposed separation of Lions Gate's Studios and Starz businesses aligns with a broader trend in the media and entertainment industry where diversified conglomerates are unbundling assets to unlock value. By creating two focused entities, Lionsgate aims to allow each business to pursue independent strategies tailored to their specific market dynamics – content production and distribution for the Studios, and premium subscription streaming for Starz. This move could attract different investor bases and potentially lead to higher valuations for the specialized companies, similar to other media spin-offs seen in recent years.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Director Designee (New Lionsgate Board)	NA	Mr. Fries	Upon completion of Separation Transactions	Initial designee of Liberty Global under the New Lionsgate Investor Rights Agreement.
Director Designee (Starz Board)	NA	Mr. Fries	Upon completion of Separation Transactions	Initial designee of Liberty Global under the Starz Investor Rights Agreement.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
New Investor Rights Agreement (New Lionsgate)	The New Lionsgate Investor Rights Agreement will grant Liberty Global and MHR tiered rights to nominate directors to the New Lionsgate Board based on their respective share ownership thresholds (e.g., Liberty Global: 1 designee for >= 5,000,000 New Lionsgate Common Shares; MHR: 3 designees for >= 10,000,000 shares, 2 for >= 7,500,000, 1 for >= 5,000,000).	Upon completion of Separation Transactions	Establishes a new governance structure and defines board representation for key shareholders in the separated Studios entity, ensuring their influence on strategic decisions.
New Voting Agreement (New Lionsgate)	The New Lionsgate Voting Agreement will require Liberty Global to vote shares exceeding 18.5% of New Lionsgate's outstanding voting power in the same proportion as votes cast by other shareholders for certain major transactions (e.g., mergers, asset sales). It also obligates Liberty Global and MHR to vote in favor of each other's director nominees.	Upon completion of Separation Transactions	Defines voting alignment and control mechanisms for significant corporate actions and board elections in the separated Studios entity, potentially limiting unilateral control by large shareholders on certain matters while ensuring mutual support for board nominees.
New Investor Rights Agreement (Starz)	The Starz Investor Rights Agreement will grant Liberty Global, Discovery, and MHR tiered rights to nominate directors to the Starz Board based on their respective share ownership thresholds (e.g., Liberty Global & Discovery: 1 designee each for combined >= 10,000,000 Starz Common Shares; MHR: 3 designees for >= 10,000,000 shares, 2 for >= 7,500,000, 1 for >= 5,000,000).	Upon completion of Separation Transactions	Establishes a new governance structure and defines board representation for key shareholders in the separated Starz entity, ensuring their influence on strategic decisions.
New Voting Agreement (Starz)	The Starz Voting Agreement will require Liberty Global and Discovery to vote shares exceeding 18.5% of Starz's outstanding voting power in the same proportion as votes cast by other shareholders for certain major transactions. It also obligates Liberty Global, Discovery, and MHR to vote in favor of each other's director nominees.	Upon completion of Separation Transactions	Defines voting alignment and control mechanisms for significant corporate actions and board elections in the separated Starz entity, similar to the New Lionsgate agreement, ensuring mutual support for board nominees while limiting disproportionate voting power on certain matters.
Termination of Existing Agreements	The existing Studios Investor Rights Agreement, Investor Rights Agreement, Voting and Standstill Agreement, and Registration Rights Agreement will be automatically terminated upon the execution of the new agreements related to the separation.	Upon completion of Separation Transactions	Streamlines and updates the overall governance framework, replacing previous agreements with new ones tailored to the two-company structure, ensuring legal and operational clarity post-separation.

Related Party Transactions

The New Lionsgate Investor Rights Agreement will be entered into by New Lionsgate, LGVL, Liberty Global, MHR, and the Seller Funds.
The New Lionsgate Voting Agreement will be entered into by New Lionsgate, LGVL, Liberty Global, MHR, and the Seller Funds.
The New Lionsgate Registration Rights Agreement will be entered into by New Lionsgate and LGVL.
The Starz Investor Rights Agreement will be entered into by Starz, LGVL, DLIL, Liberty Global, Discovery, MHR, and the Seller Funds.
The Starz Voting Agreement will be entered into by Starz, LGVL, DLIL, Liberty Global, Discovery, MHR, and the Seller Funds.
The Starz Registration Rights Agreement will be entered into by Starz and LGVL.

Stakeholder Impact

Shareholders: Will receive shares in two separate public companies (Starz Entertainment Corp. and Lionsgate Studios Corp.), potentially allowing for more focused investment and valuation. New governance agreements will define voting rights and board representation for major shareholders.
Employees: The separation will create two distinct corporate structures, potentially leading to changes in organizational reporting lines and strategic focus for employees within each new entity.
Customers/Suppliers: No direct immediate impact mentioned, but the strategic focus of two separate companies could lead to different operational priorities and business relationships over time.

Next Steps

Shareholder approval of the Separation Transactions is required.
Completion of the Separation Transactions, which will result in the creation of Starz Entertainment Corp. and Lionsgate Studios Corp.
Execution of the New Lionsgate Investor Rights Agreement, New Lionsgate Voting Agreement, and New Lionsgate Registration Rights Agreement.
Execution of the Starz Investor Rights Agreement, Starz Voting Agreement, and Starz Registration Rights Agreement.

Key Dates

Date	Description
2015-11-10	Share Purchase Agreement, Investor Rights Agreement, Voting and Standstill Agreement, and Registration Rights Agreement were dated.
2015-11-12	PPV Confirmation and Pledge Agreement were dated.
2015-11-20	Original Schedule 13D was filed by the Reporting Persons.
2016-06-30	Amendment No. 1 to Schedule 13D, Amendment No. 1 to Investor Rights Agreement, and Amendment to Voting and Standstill Agreement were filed/dated.
2017-02-10	Amendment No. 2 to Schedule 13D and Reclassification Adjustment Confirmation were filed/dated.
2019-09-03	Amendment No. 3 to Schedule 13D was filed.
2019-09-06	Amendment No. 4 to Schedule 13D was filed.
2019-10-02	Schedule 13D was filed by Dr. Malone.
2020-09-08	Amendment No. 5 to Schedule 13D was filed.
2020-09-18	Amendment No. 6 to Schedule 13D was filed.
2021-12-17	Schedule 13D was filed by Discovery.
2024-05-13	Investor Rights Agreement and Amendment to Voting and Standstill Agreement were dated.
2024-05-15	Amendment No. 7 to Schedule 13D was filed.
2025-01-17	Aggregate 83,691,063 Voting Shares outstanding as reported on Form S-4.
2025-01-27	Date of event requiring filing of this statement; Issuer filed Registration Statement on Form S-4 describing the Separation Transactions.
2025-01-28	Schedule 13D was filed by MHR Institutional Partners III LP and affiliated entities.
2025-01-29	Signature date of the current Schedule 13D Amendment No. 8 filing.

Recommendation

hold

Keywords

Lions Gate Entertainment, Starz, Lionsgate Studios, Corporate Separation, Spin-off, SEC Filing, Schedule 13D, Liberty Global, MHR Fund Management, Warner Bros. Discovery, Investor Rights Agreement, Voting Agreement, Registration Rights Agreement, Media Industry, Entertainment, Film Studio, Streaming Platform

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