Legendary Is Looking To Acquire Lionsgate

Legendary Entertainment is exploring an acquisition of the newly-free-of-Starz studio Lionsgate.

The Big Picture: Legendary and Lionsgate have been on parallel M&A paths over the past couple of years — Legendary finally shed controlling shareholder Dalian Wanda Group through a deal with PE firm Apollo, while Lionsgate recently completed the separation of its studio business from streaming service Starz. In many ways, this deal almost feels inevitable.

Behind the Scenes: With Skydance also on the one-yard line in completing its deal for Paramount (a target that Legendary also pursued), the M&A landscape in Hollywood is heating up.

• To start, Legendary and Lionsgate are feeling each other out by co-producing a few movies — Legendary is the co-financier of blockbusters like Godzilla and Dune, while Lionsgate is behind the John Wick and The Hunger Games franchises.
• But unless things go sour, that’s just a stepping stone toward a full acquisition by Legendary, which has a massive war chest thanks to Apollo and has hired bank Moelis & Company to kick the tires on the deal points.
• The deal would be a massive win for Legendary — the company has only 180 employees, while Lionsgate has roughly 1,400.
• Nonetheless, investors were ecstatic about the potential takeover, sending Lionsgate’s shares up 20%.

Final Credits: The matchup between Legendary and Lionsgate seems to make sense for both studios. Legendary lacks its own distribution arm and library — assets it would immediately gain through a deal with Lionsgate. Meanwhile, Lionsgate has struggled to compete financially with the major studios; its closest corollary was MGM, which Amazon acquired. By teaming up with Legendary, the new studio would enter the big league.

The Takeaway: While Lionsgate is mainly known for mid-budget genre films, expect Legendary’s epic-scale ethos to change what kind of movies the new studio makes.