Starz CEO Chris Albrecht is about to get a fiefdom all his own, at least until Starz is picked off by a bigger fish.
As John Malone's Liberty Media prepares to spin Starz off into a separate public company, Wall Streeters figure a sale is pretty much inevitable: Starz needs lots of cash to fund original programming, and it's relatively small at a time when battles with distribs call for major muscle. Shares of AMC Networks took a beating this summer over its skirmish with Dish.
Redbox Instant as possible buyers.
"Rather than license movies to HBO, why not control a movie channel leveraging Universal's content?" he said of a potential NBCUniversal-Starz hookup. A studio deal would help shield Starz from the risk of losing its current output deals with Sony and Disney.
Alternately, Redbox's streaming service with Verizon is in its nascent stage, "and they are clearly looking to create a unique consumer experience focused around movies," Greenfield said. A Starz acquisition would allow the venture to phase in high-quality content starting next year.
Time Warner, Disney, News Corp. and CBS Corp., which is always looking for ways to shift its revenue mix away from advertising, are also seen as potential suitors.
Albrecht wouldn't comment on Starz's plans. "As we get closer to the actual date, we will look and see what opportunities are there," he said Wednesday during a conference call. Meanwhile, the spinoff will boost Starz's profile and provide the capital structure, currency and cash "to pursue all kinds of value-enhancing strategies," he said.
Starz would have to wait six months after the split to do a big acquisition deal.
"The senior Starz team and I are very energized by the decision to make Starz its own independent company," Albrecht said. "I believe this stand-alone structure is the first step to unlocking the real potential growth opportunities."
The new Starz will include $1.5 billion in debt, assuming full draw down of the Starz bank facility, and an undetermined amount of cash. The spinoff needs some approvals and is expected to move ahead late this year.
Starz had 20.7 million subscribers at the end of last quarter, while its sibling Encore is at 34.2 million, up 9% and 4% respectively.
Revenue was flat at $403 million as higher sales at the channels biz were offset by a dip in Starz distribution and animation. Operating income fell 8% to $108 million on higher programming costs.
Season two of Starz's original drama "Boss," starring Kelsey Grammer, premieres next week and the last installment of "Spartacus" in January. David Goyer's new series, "Da Vinci's Demons," and the second season of "Magic City" will roll out in the first half of 2013.
Encore will launch a Miniseries Showcase on Monday nights this fall starting with the original "The Crimson Petal and the White."
As for Liberty, chief exec Greg Maffei said the Starz spinoff will give it cash infusion that will help it in a quest to take over Sirius XM Satellite Radio.
It recently boosted its stake in Sirius to 46% and needs coin "to preserve all its options," Maffei said. It may also raise its stake in concert promotion giant Live Nation.
Liberty's revenue and operating income were flat at $537 million and $126 million, respectively.
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