Starz Placed $25 Billion Bid For All Of Warner Bros. Discovery’s Cable Networks Including Cartoon Network And TLC

Starz put in a $25 billion bid for all of Warner Bros. Discovery’s cable networks and 20% of its studio and streaming businesses last month, TheWrap has learned, acting as a dark horse contender for an asset most companies bidding on the entertainment company were not interested in.

Warner Bros. Discovery revealed in a filing with the U.S. Securities and Exchange Commission that a previously undisclosed company — labeled “Company C” in the filing — put in the $25 billion all-cash bid on its Nov. 20 deadline. It also proposed a 90-day exclusivity period, which Netflix, Paramount Skydance and Comcast (labeled “Company A” in the filing) did not.

That company was Starz. While the WBD board considered all the bids on Nov. 21, it found that Company C’s bid was “not actionable at that time” and responded to the top three bidders on Nov. 22.

Puck first reported the news.

The filing also revealed more details about Netflix’s and Paramount’s efforts to purchase some or all of WBD, as the companies publicly advocate for their bids to WBD’s shareholders. Netflix and WBD entered into an exclusive arrangement for the streamer’s $82.7 billion bid for the studio and streaming businesses, while Paramount has mounted a $30-a-share hostile takeover bid for the entire company. WBD on Wednesday rejected Paramount’s latest offer.

A Starz spokesperson declined to comment. Starz CEO Jeff Hirsch previously told TheWrap that he wanted his company to be “additive” to networks he believed were too linear-focused in a digital age.

“There’s a lot of networks out there today that are marooned on the linear side and don’t have technical capabilities to do what we’ve done,” he said in May after Starz completed its spin-off from Lionsgate. “We think we can be very additive to content that is stuck on the linear side to give them a digital future.”

Starz reported a $53 million loss in its third quarter, missing Wall Street expectations, and revenue dropped 8% to $320.9 million. It reported a loss of 130,000 U.S. subscribers for a total of 17.5 million, driven mostly by linear subscribers’ cord-cutting. Linear subscribers also dropped by 24o,000 to 5.17 million while it saw a streaming increase of 110,000 U.S. subscribers for a total of 12.3 million.

Still, Hirsch teased the possibility of venturing into the M&A space during its third-quarter call in November, a week before the company reportedly placed its bid for WBD’s cable networks.

“With a potential for increased consolidation across the media landscape, we believe that we are uniquely positioned to capitalize on potential M&A opportunities,” Hirsch said. “Given our track record of profitability converting our business from linear to digital and our industry-leading tech stack, we are positioned to increase our scale as assets that are strategically valuable to Starz become available.”

The company reportedly found its first target last month when it expressed interest in A+E Global Media, the parent company of networks such as Lifetime and the History Channel.

Lionsgate Leaning Toward Spinning Off Its Studio Business Instead Of Starz

Lionsgate is now leaning toward spinning off its studio division and selling a minority stake in it, rather than spinning Starz, according to sources.
Lionsgate hasn’t given up on also selling a minority stake in Starz, but there’s more investor interest in the studio business, they added.

Longer term, Lionsgate executives have interest in selling both the studio and Starz, sources said.
The studio business produces films and TV series, and includes a library of more than 17,000 titles, such as “The Hunger Games” and “Mad Men".

This would be a change in strategy for the media and entertainment company, which said in May it expected to finalize a spin or sale of Starz by the end of summer. In recent months, Lionsgate has held talks to sell a 20% stake in Starz to a number of potential buyers, including most recently Vivendi-owned Canal+, the people said, who asked not to be named because the discussions are private. Those talks haven’t ended, but no deal is imminent, said the people.

Lionsgate is engaged in talks with multiple potential partners about selling a stake in the studio business, said the people. Those talks are likely to more quickly reach a deal Lionsgate is comfortable with than for Starz since there’s more robust interest, the people said. The studio business produces films and TV series, and includes a library of more than 17,000 titles, such as “The Hunger Games,” “The Expendables,” and “Mad Men.”

In a securities filing Wednesday morning, the company confirmed it “remains on a path” toward separating the two businesses and has shifting its thinking toward a studio spin.

“As negotiations progress, we have increased our focus on the possibility of spinning our studio business, creating a number of financial and strategic benefits,” Lionsgate said in the filing. “In that regard, we are continuing productive negotiations with prospective strategic and financial partners on both sides of our business,” the filing said.

Shares of the company rose about 1% Wednesday morning.

Selling a stake in the studio to a private-equity firm or strategic company will set a valuation floor for the business to trade on its own. It would also bring an immediate jolt of capital to Lionsgate, whose shares have plummeted in recent years. Lionsgate’s market valuation is about $1.8 billion, down from nearly $7 billion in early 2018.

Longer term, Lionsgate is interested in selling both the studio and Starz, said the people. The company competes against much larger entities – including Netflix, Disney, Amazon, Apple and Comcast's NBCUniversal – in TV and movie production. Lionsgate executives hope a spin off of the studio and separation of Starz would be first steps toward facilitating a sale of both units to maximize value for shareholders, said the people.

“We’re not going to make a dumb deal on one or both sides of the business,” Lionsgate vice chairman Michael Burns said during a Bank of America media and entertainment conference last month. “I think our shareholders will be very happy with the outcome.”

Starzplay rebrand
Lionsgate also plans to rebrand its international streaming service, Starzplay, to Lionsgate+, said the people. The rebrand will take place in 35 countries in Europe, Latin America and Asia Pacific, including the U.K., France, Germany, Australia and Japan, one of the people said. The company confirmed the change later Wednesday morning.

Starz’s streaming service will keep the Starz brand in the U.S. and Canada, the person said. Starz is in 63 countries and ended last quarter with 26.3 million global streaming subscribers.

Rebranding Starz to Lionsgate+ also keeps a link between Lionsgate and Starz even as the businesses separate.