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No. of Recommendations: 9
This is one of those names I follow off and on like Discovery. One of the few remaining independent film/TV studios, they bought Starz 2.5 years ago for $4.4bn in cash and stock, LGF only worth $3.2Bn market cap today.

They turned down an offer of $40 from Hasbro [yes] like 18 months ago. Whoops. Stock is now $15, cut in half in 12 months.

The Chairman bought about $10m in shares in December, and he's already a 10% owner. John Malone also owns around 8%.

OTT subs were like 300k last Q. Stock trades about 9x ebitda. EPIX, a much smaller network got bought for 11x.

Firm is well diversified btw Movies, TV, Production - recent pilot order from NBC. They do about 7% of Hollywood box office compared to Fox at 12% and Disney at 23%.

Really good acquisition candidate you'd get tax savings and also cost savings from integration. Their two most popular shows have younger showrunners. Expanding to France, Italy and Spain this year.

Motion pictures are weak this year, this is more of a 2020 story which means by now to me. I can't see how this doesn't get back to $23 at a minimum.

As others have noted, with Disney and TimeWarner offering their own OTT services, large portions of libraries will be gone. Here are the expiries:
Starz/Sony 2021, Epix/LGF 2021, HBO/Universal 2022, HBO/Fox 2022, HBO/Summit 2022.

LGF owns 16,000 films from My Little Pony, Twilight to Dirty Dancing to Rambo to Total Recall, The Hunger Games, La La Land, Saw, It's a Wonderful Life and everything in between. John Wick franchise is expected to be turned into a TV series.

If you're Amazon or Netflix who just lost Disney or Disney or HBO/TW paying under $5bn or whatever seems like a screaming bargain to me for this content. Maybe New Fox is interested. CBS and Viacom have been interested.

Risks: Well, you know the entertainment industry! The movies could bomb. They might not create any new series like Nashville, Mad Men, Power and Outlander. Cable companies looking to cut costs could pay them less to carry them. Subs who have Netflix, Amazon, and say Hulu/Disney may decide they don't need another channel [I think this is overblown, most people I know don't regard Prime as another channel they pay for, and you can get all of the above plus Starz for about half your cable bill.]
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No. of Recommendations: 1
Intriguing! Are there any plans around the $4 B debt they took on for the starz purchase?
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No. of Recommendations: 2
Rolling their debt is not an issue: On February 4, 2019, Lions Gate Capital Holdings LLC (LGCH), an indirect wholly owned subsidiary of Lions Gate Entertainment Corp. (the Company), completed its previously announced offering (the Offering) of $550,000,000 aggregate principal amount of its 6.375% senior notes due 2024.
Prior to that they issued similar amount at 5.875, so costs have gone up a whole 50 bps.

Term Loan B at Libor +375 floored at 0.75%. Net annual interest expense is around $93m prior to the above issuance.

EV/ebitda is 2.6x. Company has $380m in cash prior to above issuance. Debt is Ba3 from Moody's. Last fiscal year they reduced debt by $650m and re-introduced a dividend.

They also have s2 of American Gods coming, Counterpart s2 just ended, and a British production of one of my favorite recent novels The Rook coming out as well.

Apple streaming is supposed to include Starz starting in April, so increased revenue there.

LGF also produces 6 series for NFLX, including Orange is the New Black. Starz comprises Encore and MoviePlex as well.

They launched a theme park in Dubai last year, and are launching two more in China and Korea, lotta upfront costs that will begin to cashflow.

Starz Canada, Mideast and Africa just launched last year so expect more growth there.

If it wasn't risky it wouldn't have fallen 50% in a year. But the assets and operating cash flow look pretty darn cheap to me.

Long LGF,
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No. of Recommendations: 5
So, according to DIS, their new streaming service will of course have Marvel, Disney, Pixar, and LucasFilm [Star Wars Episodes I-VI will not be on the service as Disney sold the rights to Turner until 2024.] which is totally great but a small number of movies, and their other library is 400-500 films which is....not great at all?

Leaving aside TV series from DIS/LGF for now, you'd really think they'd want to grab the 15-16k library of LGF to add content to their platform: My Little Pony, Twilight, Dirty Dancing, whatever. They could just roll in Starz, Encore, MoviePlex to the Disney+ service for no added cost or a small one.
Also, Starz still has rights to the Disney-owned Touchstone Pictures for more years.

If they didn't want violent R-rated movies they could just sell them although of course Marvel films like Deadpool are very, very R-rated. As are Blade, Punisher, Kick-ass, Daredevil, Logan and their sequels.

Additionally, they would of course get all the LGF tv series as well and also able to cut duplicative costs there. Many of the canceled NFLX tv series DIS can't start up again until 2020.

DIS already is committed to spending $300m for a total of 27 episodes of a new series from Star Wars, also one from Scarlet Witch, and Loki. Buying 51% of LGF's $3.3b equity seems like a bargain to me.

Of course, NFLX could come to the same conclusion.

Stock up 4% today fwiw.
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No. of Recommendations: 3
Possibly relevant, possibly not, DIS just sold the YES network which televises Yankees and Nets games for $3.47 Bn to a group of investors including the Yankees.
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No. of Recommendations: 2
This author laments Apple's unenviable position with not a whole lot of content, and up against a brutal $6.99/month price point for Disney+.

Naj, any reflections on Apple as a LFG buyer, or otherwise LFG-related coming out of this DIS analyst day?

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No. of Recommendations: 2

Think this is a really interesting company. Had exposure since Artisan ACQ days--quaint to remember the much, much smaller company and how excited folks were about BO performance of Open Water--and increase/decrease position based on market sentiment. The movie business is certainly cyclical, but Feltheimer (CEO) has consistently proven to be able to navigate the niches the big boys ignore, and has shown an ability to largely stay with/ahead of the technology curve.

Even in today's world of increasing content creation the library still has a lot of value, and I full agree the company makes a lot of sense as an acquisition candidate. I never fully exit, because that DWA/MVL moment may come at any time.

Two negatives on ACQ front:

-I think the Starz purchase makes them slightly less attractive to the streaming groups, as many/most of these groups see any attachment to linear TV as a negative. Not saying I think that is smart, but I can imagine the dinosaur labels being thrown around. Hopefully folks see Amazon pay $250M for the Lord of the Rings prequel rights and wonder where there might be better value.

-As you mentioned, 2019 film not a banner year, and management already indicated this Q/next would be weak from profit perspective, with release/marketing costs for Hellboy, Long Shot, and John Wick. Unfortunately we know Hellboy bombed, and Longshot performed at lower end of expectations (thanks Avengers for sucking up all oxygen). I think John Wick will do really well, but we are not going to see major contributions from film group in near term.

On the positive side, I think KingKiller Chronicles has chance to be hugely successful on the premium TV side (third book ever being released?). Chaos Walking has Tom Holland and Daisy Ridley attached, though it apparently was a disaster and is undergoing reshoots. And I have to think an acquirer would look at Twilight and Hunger Games and salivate at the potential to create additional content.

Bottom line, I agree this is going back into the mid $20's or higher, but it could take some patience.
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