425: Lionsgate and Lionsgate Studios Issue Proxy Supplement, Remind Shareholders to Vote on Separation Plan

Lionsgate and Lionsgate Studios have released a supplement to their joint proxy statement and are urging shareholders to vote on the proposed separation of Lionsgate Studios from the rest of Lionsgate's businesses.

Summary

• Lions Gate Entertainment Corp. and Lionsgate Studios Corp. are proceeding with their plan to separate Lionsgate Studios from the other businesses of Lionsgate, including STARZ.
• The companies have released an investor presentation and a supplement to the joint proxy statement to clarify certain clerical errors relating to the vote requirements for certain proposals.
• Shareholders are reminded to vote at the upcoming annual general and special meeting of shareholders of Lionsgate and special meeting of shareholders of Lionsgate Studios on April 23, 2025.
• The separation will result in two independent, publicly-traded companies: Lionsgate Studios Corp. (NYSE: LION) and STARZ Entertainment Corp. (Nasdaq: STRZ).
• LGEC shareholders will receive New LION and STRZ shares, with LGF/A shareholders receiving 1.12 shares of each for every LGF/A share and LGF/B shareholders receiving 1 share of each for every LGF/B share.
• STRZ shares will undergo a 15-to-1 reverse stock split.
• The transaction requires a two-thirds approval of each LGF share class (LGF/A and LGF/B).

Sentiment

Score: 7

Explanation: The document is primarily informational and procedural, with a positive outlook on the strategic benefits of the separation. The sentiment is moderately positive due to the potential for increased shareholder value and strategic focus.

Positives

• The separation creates two highly differentiated companies in the media sector: Lionsgate Studios and Starz.
• The separation increases strategic and operational opportunities by creating pure-play businesses.
• The separation eliminates the dual-class listing, allowing for a more diversified voting shareholder base.
• Each business can attract investors aligned with its growth outlook and capital allocation.

Negatives

• The document primarily focuses on the procedural aspects of the separation and doesn't highlight any specific financial negatives.
• The document contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially.

Risks

• The inability of the parties to successfully or timely consummate the Transactions, including the approval of the requisite equity holders of Lionsgate and Lionsgate Studios.
• The inability to receive court approval of the proposed plan of arrangement in connection with the Transactions.
• The occurrence of any event, change or other circumstances that could give rise to the termination of the definitive agreements relating to the Transactions.
• Failure to realize the anticipated benefits of the Transactions.
• The effect of the announcement or pendency of the Transactions on Lionsgates or Lionsgate Studios ability to retain key personnel and to maintain relationships with business partners.
• Risks relating to potential diversion of management attention from Lionsgates and Lionsgate Studios ongoing business operations.
• Negative effects of this announcement or the consummation of the Transactions on the market price of Lionsgates or Lionsgate Studios applicable equity securities and/or operating results.
• Transaction costs associated with the Transactions.

Future Outlook

The document outlines the future separation of Lionsgate Studios and STARZ into two independent, publicly-traded companies, with the goal of creating more focused and strategically aligned businesses.

Management Comments

• The board of directors for each of Lionsgate and Lionsgate Studios strongly recommend that shareholders vote FOR each of the proposals presented at the Meetings.

Industry Context

The separation of Lionsgate Studios and STARZ reflects a broader trend in the media industry towards streamlining operations and focusing on core competencies, similar to other major media companies that have spun off or restructured their businesses to better compete in the streaming era.

Comparison to Industry Standards

• The move to separate Lionsgate Studios and Starz mirrors similar strategic decisions made by other media conglomerates like Warner Bros. Discovery, which is focusing on its core content creation and distribution businesses.
• The emphasis on franchise properties like 'John Wick' and 'The Hunger Games' aligns with the industry-wide trend of leveraging established IP to drive revenue and attract audiences, similar to Disney's approach with Marvel and Star Wars.
• Starz's focus on digital transformation and OTT revenue growth is in line with the strategies of other streaming services like Netflix and Disney+, which are prioritizing direct-to-consumer offerings.
• The valuation of Starz at approximately 3.0x EV/Adj. OIBDA is lower than traditional cable networks, which are valued at 4.5 6.0x, reflecting the market's preference for digital and streaming businesses.

Stakeholder Impact

• Shareholders will receive shares in two separate companies, potentially allowing for more focused investment choices.
• Employees may experience changes in their roles and responsibilities as the companies separate.
• Customers of Lionsgate Studios and STARZ may see changes in content offerings and distribution strategies.
• Suppliers and business partners will need to adapt to the new organizational structures and relationships.

Next Steps

• Shareholders of Lionsgate and Lionsgate Studios need to vote on the proposals at the Meetings on April 23, 2025.
• The companies will seek court approval for the proposed plan of arrangement.
• If approved, the separation will be implemented, resulting in two independent, publicly-traded companies.

Key Dates

Keywords

Lionsgate, Lionsgate Studios, STARZ, Separation, Shareholders, Proxy Statement, Transactions, Voting, Arrangement Agreement, Reverse Stock Split