Lionsgate plans $4.6 billion in bank and bond financing with Starz buy

By Sara Rosenberg

New York, June 30 – Lionsgate has received a $4.6 billion debt financing commitment in connection with its acquisition of Starz for a combination of cash and stock totaling $4.4 billion, according to an 8-K filed with the Securities and Exchange Commission on Thursday.

JPMorgan, Bank of America Merrill Lynch and Deutsche Bank are leading the debt.

The debt commitment includes a $1 billion revolver and $3.6 billion of bank and bond financing.

Proceeds will be used to pay the $1.6 billion cash consideration for the Starz acquisition, to refinance about $1.7 billion to $1.9 billion of debt at both companies and to pay fees and expenses.

Lionsgate’s existing convertible notes and Starz’s capital leases are expected to remain in place.

Under the agreement, each share of Lionsgate common stock will be reclassified into 0.5 voting and 0.5 newly created non-voting shares. Holders of each share of Starz series A common stock will receive $18.00 in cash as well as 0.6784 of a share of Lionsgate non-voting stock based on a fixed exchange ratio. And, holders of each share of Starz series B common stock will receive $7.26 in cash and 0.6321 of a share of Lionsgate voting stock and 0.6321 of a share of Lionsgate non-voting stock.

Pro forma leverage, excluding synergies, is expected to be about 5 times to 5.5 times as of Dec. 31, 2016, with the ability to rapidly delever given the expected highly cash generative nature of the combined entity.

Closing is expected by year-end, subject to shareholder approval and regulatory approval.

Lionsgate is a Santa Monica, Calif.-based entertainment company. Starz is an Englewood, Colo.-based media and entertainment company.

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