M&A News: 'A Pure-Play Studio' Lionsgate Studios (NYSE:LION) an Acquisition Target

Business Insider

a day ago

There was once a time, back when video stores dotted the landscape and buying a DVD at an electronics retailer was a thing of charming simplicity, that movie producer Lionsgate Studios (LION) ruled the landscape in the field of direct-to-video releasing. But those days are gone, perhaps forever, and Lionsgate now finds itself a potential acquisition target. The news did little good for Lionsgate stock, however, as investors sent shares down over 2.5% in the closing minutes of Monday's trading.
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Lionsgate is drawing interest from Legendary Entertainment LLC. Backed by Apollo Global Management (APO), Legendary is the studio behind, among other things, the recent hit remake of Dune. After Lionsgate separated itself from the Starz Entertainment Group, which runs the Starz line of cable movie channels as well as a streaming service, Lionsgate proved more attractive to Legendary, reports noted.
As a 'pure-play studio,' noted Geetha Ranganathan of Bloomberg Intelligence, the deal makes sense, and reports suggest that the two are already looking into producing some movies together to see how they might work together. And with around a third of Lionsgate's revenue coming from its stable of library content—and that at a '…high profit margin…'—the end result is an attractive proposition for Legendary.
Kid-Friendly Cuts Within Hours With AI
Meanwhile, Lionsgate also revealed, not so long ago, that it was very much prepared to make artificial intelligence (AI) part of everyday operations. In fact, Lionsgate even had use cases ready, including the ability to adjust a movie's rating—not especially hard; removing a few extra obscenities or a particularly violent scene can drop a movie from R to PG-13 in rapid fashion—or to make it 'kid-friendly.'
Lionsgate looks to turn to the Runway platform, setting up what reports called Runway's '…first deal with a Hollywood studio.' Vice chairman Michael Burns described how AI allows Lionsgate to '…make movies and television shows we'd otherwise never make.' The judicious use of AI, reports noted, can cut production costs in half and, just like magic, make a property viable.
Is Lionsgate a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LION stock based on five Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 16.19% loss in its share price over the past year, the average LION price target of $9 per share implies 31.2% upside potential.