CBS’s seemingly inexorable march toward acquiring Viacom may take a detour.
The company recently talked to Lions Gate Entertainment about buying that company’s Starz cable network, according to people familiar with the matter, a deal that could happen alongside a potential purchase of Viacom. CBS made an informal bid of about $5 billion that was rebuffed, the Information reported, but the suitor remains interested.
Reuters reported that Lions Gate offered to sell Starz to CBS for $5.5 billion, suggesting that the two sides aren’t too far apart.
News of the talks sent shares of Lions Gate up 15% on Friday, marking their biggest single-day rally in 18 years.
Starz has become a key asset for the struggling Lions Gate studio, known for the John Wick and Hunger Games movies, and the company has been seeking ways to expand the network’s footprint. Lions Gate has held talks with potential partners about funding Starz’s international growth, Bloomberg reported last week.
A $5 billion offer would be bigger than Lions Gate’s entire market capitalization, though the studio’s enterprise value—a figure that includes debt—is $6.67 billion.
Earlier Approach
CBS was interested in buying Starz before it got acquired by Lions Gate for $4.4 billion in 2016. The network, which carries shows such as American Gods, attracts an audience that CBS doesn’t reach with its current lineup. In addition to its broadcast network, CBS owns the premium channel Showtime.
The company is weighing its next moves after the ouster of longtime Chief Executive Officer Les Moonves last year. He was fired in September after a dozen women accused him of sexual misconduct, setting off a shake-up that included a board overhaul. Joe Ianniello, formerly chief operating officer, has been running the New York-based company as interim CEO ever since.
The Redstone family, which controls both CBS and Viacom, has long advocated a merger of those two companies. Shari Redstone can’t propose such a deal for a couple years under a legal settlement her family holding company reached with CBS when Moonves left. But that doesn’t prevent other board members at CBS or Viacom from proposing a deal.
Stock Surge
Shares of Lions Gate jumped to $15.60 on Friday, giving it a market value of $3.23 billion. The stock had been down 16% this year through Thursday’s close.
Viacom slipped less than 1% in the wake of the news, while shares of CBS were little changed.
Lions Gate has been speaking to financial and strategic investors about financing the rollout of its Starz network in overseas markets, people familiar with the situation said last week. A deal could involve raising several hundred million dollars for a multiyear rollout of the subscription video service into more countries, the person said, asking not to be identified as the details aren’t public.
In March, Apple said it will carry the channel on its upcoming streaming service, following an agreement last year for it to be part of Amazon Prime in the U.K. and Germany.
Starz has also launched in Canada on Bell Media and is the leading subscription video-on-demand service in the Middle East and North Africa. The network could be in over 50 international territories by next year.
