Citi analyst praises Lionsgate Studios' spin-off

Industry Report Lionsgate's decision to split into two separate publicly traded companies stands in stark contrast how consolidation has plauged the entertainment industry. In recent years, larger media companies have been merging to better compete in a rapidly changing market. Major mergers, such as Warnes Brothers merger with Discovery and Comcast’s merger with NBCUniversal, illustrate the desire for consolidation, where larger conglomerates hope to maximize assets, from film studios to streaming platforms. Lionsgate’s split, however, is a strategic move in the opposite direction. By separating its studio operations from Starz, Lionsgate seeks to create two focused entities that can pursue independent operating strategies. This allows each company to concentrate on its core strengths, with Lionsgate Studios honing its focus on content creation and production, while Starz can zero in on its streaming and television platforms. Moreover, Lionsgate’s decision reflects a growing sentiment among some media companies that splitting operations can create help zero in on the priorities of a media giant. It acknowledges the evolving landscape of entertainment, where companies must be adaptable to new technologies and shifting consumer preferences. While consolidation can offer financial strength, Lionsgate is betting that a more focused strategy will allow its businesses to thrive and potentially offer new avenues for acquisition or merger in the future. This decision underscores the diversity of approaches in the entertainment indusrty, highlighting that consolidation is not the only path to success. https://lnkd.in/eJYKUHGw James (J.T.) Hutchinson Esquire Group Inc.

Warner Bros. Discovery (WBD) is an interesting candidate for potential acquisition or strategic investment due to its unique position as one of the three streaming survivors (Netflix and The Walt Disney Company being the other two) and its significant undervaluation compared to historical highs. With Paramount Global Shari Redstone, who controls Paramount through her family's holding company National Amusements (NAI), ended merger talks with Skydance Media could attention turn to WBD with further price weakness? 📉 ▪️From January 2024 high ($11.66 to $7.24): The decline here represents a decrease of approximately 38%. ▪️From 52 Week high ($14.76 to $7.24): This represents a decrease of approximately 51%. Here’s a comparative analysis of WBD’s book value, DCF valuation, and breakup value against its current market price of $7.24/share: ▪️Book Value: $16.73 (discount 57%) ▪️DCF Value: $10.49 (discount 30%) ▪️Breakup Value: $9.31 (discount 22%) Note that “Breakup Value” is tough to get right without insider info so breakup could be higher or lower. I used market multiples and info I could find in financials. Treat as a back of the napkin, please. The DCF analysis uses a weighted average cost of capital or discount rate between 6.5% and 7.9%, and a long-term growth rate set at 4%. Strategic Considerations ▪️Market Position: WBD remains one of the three core survivors in the streaming service market, alongside Netflix and Disney. Its current undervaluation compared to these competitors, who have not seen similar declines, makes it an attractive target for investors looking for value and growth potential. The is zero future performance premium built into the stock price, what would John Snow do? 🐲 ▪️Pricing Power: WBD raised prices of ad-free Max subscriptions reflecting its content strength. If this was a company in decline the opposite might be true. Here is the story: https://lnkd.in/gNQx4FGB ▪️Institutional Ownership and Potential for Block Sales: WBD has a substantial institutional ownership of over 50%, which means a significant portion of its shares are held by large financial organizations, mutual funds, and pension funds. These institutions can execute large block sales off-market, providing a streamlined pathway for an interested investor group to acquire a substantial stake without disrupting market prices significantly. ▪️Very Limited Insider Buying: In mid-May 2024, WBD President of International, Gerhard Zeiler, increased his holding to 908,130 shares with a purchase of 100,000 shares at $8.3. Over the past 12 months, insiders have added 5.5M shares. https://lnkd.in/gug9jU2Q 📣 The combination of WBD’s strong market presence, significant discounts on various valuation metrics, and the structural potential for large block transactions makes it an appealing candidate for a take-private deal or a strategic merger. I bought shares of WBD on the close—not investment advise.

Star Entertainment Group Limited (ASX: SGR) Breaks Losing Streak with a 7.1% Rebound! 🎰 Star Entertainment Group Limited has just ended a five-day downturn, with shares climbing 7.1% to $0.225, at the time of writing. This bounce-back comes after a period of heavy selling by Perpetual, which recently divested 129.7 million shares at a discounted 20 cents each, totaling approximately $26 million. Despite the initial pressure from this large sell-off, investor interest appears to be reigniting. The discounted entry points have created renewed optimism, especially as Star Entertainment maneuvers through regulatory and financial challenges. With the market now watching closely, there’s cautious hope that the company’s strategies and future leadership will stabilize operations and restore investor confidence. Can Star Entertainment sustain this positive momentum? Only time will tell, but today's rebound is certainly a step in the right direction. 🚀 https://lnkd.in/gn5YVSKC hashtag #StarEntertainmentGroup hashtag #ASX hashtag #StockMarketUpdate hashtag #Investors hashtag #CasinoIndustry hashtag #MarketRebound

🎥 The Studio Merger of the Year: What It Means for Hollywood and Beyond The power plays shaping Hollywood’s future aren’t just about who’s signing deals—they’re redefining how studios, talent, and audiences interact. This year’s biggest studio merger is a testament to innovation and adaptability in an ever-changing industry. The question remains: how will these shifts shape the future of entertainment and the customer experience that drives it all? Let’s dive in. https://lnkd.in/gr9QYT4H

Warner Brothers Discovery is taking a whopper of a goodwill impairment on Discovery's acquisition of WarnerMedia in 2021 from AT&T (history lesson: AT&T lost tens of billions buying and selling it after holding it just three years). I have been stating for more than 20 years that goodwill is the tacit admission of what a buyer overpays for a company. Yet, these write-downs often occur long after the deal team that fostered the pig of an acquisition (and the subsequent write-down) are long gone. Deal compensation often depends on total deal value (i.e., the headline amount), not actual deal value creation. Hence the agency conflict. Maybe if deal compensation were based on the net value excluding goodwill allocations, we would see less of this unaccountable shareholder value destruction. https://lnkd.in/gbx9xaXC

Keywords Studios Agrees to £2.2 Billion Acquisition by EQT Group - Dublin-based video game services group Keywords Studios has accepted a £2.2 billion bid from European private equity firm EQT, highlighting substantial growth prospects under new ownership. This transaction has resulted in a 2.9% increase in Keywords' shares, rising to 2,384 pence in early trading. - Keywords' board has recommended shareholders accept the 2,450 pence per share cash offer, reflecting a 66.7% premium to the firm's closing price on May 17, before bid discussions were announced. Keywords Chair Don Robert emphasized the opportunity for shareholders to realize significant value through this premium offer. - The acquisition bid comes amidst a challenging period for Keywords, which serves major clients like Activision Blizzard, Netflix, and Microsoft. The company has faced lower margins due to slower content creation trends and project deferrals, particularly in Hollywood. Despite these challenges, EQT sees significant growth potential for Keywords, envisioning it as a leading global integrated gaming services provider with the right investment. - Keywords provides a range of services to the video games industry, including game development, translation, and sound effects. However, the company reported that first-half organic growth was impacted by the postponement or cancellation of several large game development projects. - The bid, initially disclosed on Friday, is slightly lower than the 2,550 pence offer revealed in May but higher than a previous proposal made two days earlier. Keywords shareholders Franklin Templeton and Pictet Group have already expressed their support for the deal. - This acquisition is part of a broader trend of increased private equity activity, with global buyout activity surging 41% to $286 billion in the first half of the year. The offer must receive approval from shareholders representing at least 75% of the votes cast at Keywords' upcoming general meeting. - The landscape of the video gaming market, driven by streaming models and the shift to mobile, has created attractive growth opportunities, making companies like Keywords prime targets for buyouts. Keywords' shares, which have fallen about 30% from their September 2021 record high of £33.16, stand to benefit from this acquisition and vision EQT brings. #keywordsstudios #EQT #videogames #acquisition #privateequity #growthopportunities #activisionblizzard #netflix #microsoft #shareholders #buyout #streaming #mobilegaming #contentcreation #investment

EQT, Temasek and CPPIB, a private equity firms, completed the acquisition of Keywords Studios, an Irish video game industry services company, for £2.2bn ($2.8bn). “This is a significant milestone for Keywords Studios as we start the next phase of our growth journey alongside our new partners. The hard work and dedication of everyone at Keywords Studios, as well as the long-standing support of our clients and shareholders, has enabled our growth over the last decade and I would like to thank them all for their support. We are confident that our expertise, combined with EQT’s resources, will only strengthen our ability to serve our customers and realise our growth potential and mission to be the world’s leading content creation platform for the video gaming industry. I look forward to what the next chapter will bring for our company, customers and employees," Bertrand Bodson, Keywords Studios CEO. Keywords Studios (led by Bertrand Bodson) was advised by Deutsche Numis (led by Stuart Skinner), Robey Warshaw (led by Simon Robey), DLA Piper (led by Jon Earle and Matthew Cole) and MHP Communications (led by Katie Hunt). EQT was advised by HSBC (led by Andrew Owens), J.P. Morgan (led by Dwayne Lysaght), Morgan Stanley, Ashurst (led by Tom Mercer), Kirkland & Ellis, Simpson Thacher & Bartlett LLP (led by Ben Spiers) and FGS Global (led by Faeth Birch). Debt providers were advised by A&O Shearman. CPPIB was advised by Freshfields (led by Stephen Hewes and Simon Weller). Submit your deals here: https://lnkd.in/djcRGezn #MergersAcquisitionsDivestitures #Technology #PrivateEquity

Conyers advised special purpose acquisition company Golden Star Acquisition Corporation (“Golden Star”) on the successful closing of its previously announced business combination with Gamehaus Inc. (“Gamehaus”), a mobile game publishing company. The business combination was approved at an extraordinary general meeting of Golden Star's shareholders on 20 January 2025. Gamehaus' Class A ordinary shares commenced trading on the Nasdaq Capital Market under the ticker symbol "GMHS" on 27 January 2025. The implied total equity value for Gamehaus following consummation of the business combination is US$500 million. Partner Matthew Stocker and Associate Caroline Dekker worked alongside Wilson Sonsini Goodrich & Rosati as lead legal advisor to Golden Star. Learn more: https://loom.ly/ib_OslA #businesscombination #despac

It looks like I spoke too early, because the Paramount-Skydance merger talks have officially ended. Paramount Global's stock fell after controlling shareholder Shari Redstone decided to terminate the potential $8 billion deal with Skydance Media. The decision comes after vast negotiations and a detailed evaluation of the proposals on the table. The abrupt end to the Skydance deal caused Paramount's stock to drop significantly, reflecting investor disappointment and market volatility. Led by David Ellison, the deal with Skydance was initially seen as a strategic move that would rejuvenate Paramount by combining its resources and experience with those of a proven production powerhouse. However, Redstone and Paramount's special committee faced multiple challenges, including disagreements over the deal's terms and concerns about regulatory hurdles. Ultimately, the deal's downfall reflects deeper uncertainties about the company's future direction and strategic priorities. Investors are now closely watching Paramount’s next steps. The company still faces the challenge of finding a viable path forward amid ongoing industry consolidation and fierce competition in both traditional and streaming media. Paramount's leadership must now reassess its strategy to restore investor confidence and chart a course that leverages its diverse assets and rich content library. Stay tuned as this story develops and Paramount navigates its next moves in the ever-evolving media landscape. #Paramount #Skydance #ParamountGlobal #SkydanceMedia #ShariRedstone #DavidEllison #Merger #MediaIndustry #StockMarket #BusinessNews

Warner Bros Discovery can't recover from the merger and a series of failed projects that affected both the film and gaming segments. The company is considering a plan to sell off smaller assets, hoping to shed unprofitable cargo and mitigate the risks of a breakup. WBD's management believes the stock should be worth $25 a share, well above the $7.88 at which it closed on Monday. And who do you think is in the crosshairs? The game studio, of course. But in general, it's not surprising given the failure of Justice League and the fading Multiverse, which is stuffed with microtransactions. But the sale of the studio most likely will go with the transfer of rights, otherwise it makes no sense. The only question is what rights will WBD want to sell? Mortal Kombat, DC or Harry Potter? And who can afford it in the current situation? https://lnkd.in/enbkz57V