Liberty to spin of Starz into attractive acquisition target

Michelle Clancy | 10-08-2012

Liberty Media is planning to spin off its premium cable network, Starz, into a separate public company.

The resulting standalone entity will consist of the Starz and Encore pay-TV movie networks, which have exclusive rights to distribute new Sony Pictures and Walt Disney movies. Starz has also sunk money into creating original programming to compete with HBO, in the form of Magic City and Boss.
Subscriber totals are healthy: Starz claims 20.7 million subscribers, which was up 9% at the end of the quarter, while Encore can in at 34.2 million subs for Q2, up 4%.
Starz's Q2 revenue held steady at $403 million, while adjusted operating income before depreciation and amortisation declined 8.5% to $108 million. A full 19% of its revenue will be up for renewal with cable, satellite and IPTV companies at the end of 2012.
As a separate listed company, it will carry $1.5 billion of debt.
Even so, there are some who say that the company will immediately become an attractive--and willing--acquisition target.
"Starz simply cannot fund the level of original programming it would like to compete with HBO and Showtime, not to mention the ramping original spend of new entrants like Netflix ," Richard Greenfield, an analyst for BTIG trading, said in his blog. He went on to say that Time Warner or even Netflix could be perfect partners to woo the media company.