Lionsgate CEO Jon Feltheimer says spinning off his Hollywood film and TV studio business from Starz via a Special Purpose Acquisition Company (SPAC) deal offers the best flexibility available before completing a planned and long-awaited full separation.
“We believe this transaction sets a valuation for the studio and increases our strategic optionality as we move toward separation,” Feltheimer told financial analysts during an after-market call on Thursday. His comments to investors follow Lionsgate unveiling plans last month to back into a SPAC to create a separately traded public company with a $4.6 billion enterprise value.
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Feltheimer told analysts the SPAC deal was the best way to uncover hidden shareholder value for the studio and Starz assets after the Hollywood studio considered strategic alternatives. “We had a number of options available for executing this step in our overall strategic plan. We believe that we selected the best option for aligning with our goal of a full separation, raising capital efficiently with substantial proceeds available to delever, and establishing an appropriate valuation for our studio supported by blue chip investors,” he argued.
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The proposed SPAC-style transaction, expected to close this spring, follows nearly two years of strategic talks by Lionsgate to spin off its studio division or Starz streaming platform. Feltheimer said his company struck a “fair price” with the SPAC transaction for the studios business, without having to take longer in the market to do a bigger capital raise or secure a higher valuation by structuring the deal differently.
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“I’d say we found a price that we thought was reasonable for raising equity, but doesn’t ultimately of course represent the full value of how we consider the studio. But we’re always happy when investors old and new come in and can make money with this,” Feltheimer told analysts.
The studio business, comprising Lionsgate’s TV production and Motion Picture Group divisions and a 20,000-title film and TV library, will be combined with Screaming Eagle Acquisition Corp., a special-purpose acquisition rights company — often referred to as a blank check company — led by SPAC sponsor Eagle Equity Partners and CEO Eli Baker.
