Lionsgate plans to officially announce a Starz spinoff this summer

Lionsgate CEO Jon Feltheimer revealed details during an investor call on Thursday, May 26, about the company’s plans to spin off its Starz streaming unit by the end of the summer. He also alluded that there could be more M&A (mergers and acquisitions) for both Lionsgate and Starz if the two were separated.

Feltheimer said, “We are targeting an announcement of our plan by the end of the summer and expect a transaction could close as early as our fiscal fourth quarter.” He added that the company is engaged in conversations with bankers and “a number of potential strategic partners.”

Although he did not disclose who these possible partners were, the confirmation follows earlier reports. In an earnings call back in the fall of 2021, the company announced it was exploring strategic options for the cable network and streamer as it failed to provide a boost for Lionsgate. One solution was to sell all or a part of the asset. Michael Burns, Lionsgate’s COO said, “While we continue to realize substantial synergies from bringing Lionsgate and Starz together, we also see the opportunity to potentially unlock significant shareholder value under a scenario where investors had the ability to value our studio assets and Starz separately.”

Feltheimer noted last week that the expectation right now is that Lionsgate will retain some ownership stake in Starz, but “anything can happen,” he said. DirecTV is among many media companies looking to purchase a stake, along with Roku and Apollo Global Management, which have teamed up on a bid. Another potential suitor is Canal+, a division of French conglomerate Vivendi.

Lionsgate acquired Starz in 2016 for $4.4 billion, and over time, has steadily grown its customer base, which grew by 4.8 million for the quarter, reaching a total of 35.8 million. The CEO boasted during last week’s call that they predict Starz to hit 50 million to 60 million global subscribers (TV and streaming) by the end of fiscal 2025. The healthy numbers are another reason why Lionsgate is choosing this moment to send Starz out on its own.

Feltheimer emphasized that Starz is not aiming to compete with bigger streaming rivals, but is keeping it as a niche, ad-free service to be “layered” on top of them.

While Starz has strong content, the new company will certainly require support from other partners to succeed. We will have to wait to see which company believes that Starz has enough value to cough up the necessary costs.