With Starz now in tow, Lionsgate and Viacom are moving closer toward exiting the premium channel company and reportedly selling their stakes to MGM.
According to Deadline, Lionsgate began the process of selling off its 31.2% stake in Epix after earlier this year finalizing its $4.4 billion deal to acquire Starz. Viacom owns 50% of Epix and the deal for MGM to acquire both Lionsgate’s and Viacom’s shares could be valued around $1 billion to $2 billion.
As the report points out, MGM is the frontrunner for Epix—but another bidder could swoop in and snatch up the company.
With the Starz integration underway Lionsgate was expected to divest Epix, but as other reports have pointed out, company execs have been shy about declaring their intentions. According to Reuters, in January Lionsgate CEO Jon Feltheimer called Epix “a valuable asset” and said that Lionsgate, Viacom and MGM would “realize the value whichever way we all decide is best for our companies.”
Jefferies analyst John Janedis weighed in the value proposition for Viacom in selling off its ownership in Epix.
“Our thesis continues to assume that VIAB will further deleverage. Today's press report of a likely sale of the 50% EPIX stake is consistent with our expectations and will likely expand VIAB's investor base,” wrote Janedis in a research note.
He added that while it was likely both Viacom and Lionsgate would sell their stakes in Epix, it’s still unclear whether another bidder beside MGM has emerged.
“Outside of price, terms of rights / access to content will likely be key issues,” Janedis added.
As for Lionsgate, Janedis said that the company is in a good position for more stable growth and performance with Starz.
“We continue to like the consistency that Starz brings to the LGF model, as well as the significant cash flow,” wrote Janedis, reiterating Jefferies’ buy rating for Lionsgate.