Starz CEO Chris Albrecht Hopes His Company and Lionsgate Become ‘Kissing Cousins’

CEO speculates about why the two media companies didn’t just merge

Last Updated: February 25, 2015 @ 12:36 PM

Starz CEO Chris Albrecht dedicated some time on Wednesday’s fourth quarter earnings call to comment on his company’s recent stock swap with Lionsgate, saying he welcomes the Canadian-American entertainment company’s “endorsement of our vision” — a repetition of verbiage he used when the deal was announced two weeks ago.

“[It] gives us the opportunity to have a unique shareholder to Starz,” he added. “This takes two companies that have been good working partners and probably brings them from being colleagues and friends to maybe being cousins.”

“And maybe we’ll even be kissing cousins, I don’t know,” he quipped.

“When John Malone does something like this, he tends to set a lot of energy in motion and we’re certainly going to take advantage of this opportunity … to look at ways that we might be able to work together,” Albrecht elaborated on the deal and its main individual player.

Malone is Starz’s largest voting shareholder. As part of the agreement, he joined the Lionsgate board.

The billionaire businessman has roughly 6.1 percent equity interest and about 32.1 percent of the total voting power of Starz.

The deal will see Lionsgate swapping newly issued shares representing 3.43 percent of its outstanding common stock on a pro forma basis for a piece of Malone’s Series A and Series B Starz common stock. Malone’s and his affiliates’ holdings represent approximately 4.51 percent of Starz common stock outstanding and 14.5 percent of the total voting power of Starz common stock.

The stock swap deal has yet to close.

When analyst Barton Crockett of FBR Capital Markets asked Starz executives why the two companies didn’t just merge, Albrecht said: “I don’t want to speak for John Malone, but the people who have reported that he has a growing and new appreciation for content are probably seeing some of the same things that I’m seeing.”

“As distribution aligns, it is important for content makers to align, whether that means companies merge or they partner,” he added.

“It is certainly possible that combining our efforts could achieve a better result than each of us acting individually,” Albrecht said a little later. “I can’t predict anything, again, but I do think John Malone has an idea in his head and did not do this just because he didn’t have anything else to do.”

Albrecht’s words make it sound like maybe a future merger isn’t exactly out of the question. But for now, the pay-TV channel chief seems to think there will be an immediate benefit to the current arrangement.

“Yes, we could always buy programs from Lionsgate, but I think this arrangement … gives us an opportunity to talk to them about doing things to create mutual benefit where it didn’t exist before in the same ways,” Albrecht added.

Starz’s Q4 financials were healthy, topping Wall Street forecasts for earnings and revenue. Its numbers rose from the comparable quarter last year as the premium cable channel’s subscriber figures hit a new high.

As a result, Starz stock (STRZA) jumped right after the market opened, and at the time of this writing is trading at $33.33 per share, up $1.75 or 5.54 percent.

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