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Lions Gate is still interested in selling Starz to CBS — then might have to merge with MGM to stay relevant

Lions Gate has a market capitalization of about $3.3 billion and an enterprise value of $6.5 billion. If Lions Gate does sell Starz to CBS, the remaining entertainment company would own its film and television production units and their associated libraries. Lions Gate owns almost 17,000 movie and TV titles such as “The Hunger Games,” “La La Land” and “Mad Men.” It would also have billions in cash from the sale of Starz.

CBS isn’t interested in buying all of Lions Gate, people familiar with the matter told CNBC last week. But without Starz, Lions Gate would no longer make sense as a standalone public company, lacking both scale and growth prospects.

One option Lions Gate would likely explore is to merge with MGM, the closely held entertainment company owned by Anchorage Capital and a host of other creditors that took the company out of bankruptcy in 2010, said one of the people.

A Lions Gate deal with MGM would have some complications and is purely theoretical at this time.

MGM’s owners have rejected selling the company for years and may push for a price tag of $8 billion or more, according to people familiar with the matter. It may be difficult for Lions Gate to pull off a transaction of that size with its limited remaining assets and post-tax proceeds from a Starz sale.

Other options would include a merger of equals, or a deal where MGM acquires Lions Gate instead of the other way around. MGM and Lions Gate have been rumored merger partners for years since billionaire activist investor Carl Icahn pushed for a deal in 2010.

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