Lions Gate Deepens Malone Ties With Discovery, Liberty Deal

Deal Totals $390 Million

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Lions Gate Entertainment, the producer of "The Hunger Games" films, is deepening its ties to cable billionaire John Malone as two companies he partly owns take a combined 6.8% stake in the movie and TV studio and gain seats on the board.

Discovery Communications and Liberty Global will each acquire 5 million shares of Lions Gate from MHR Fund Management for a total of $390 million, according to a statement Tuesday. MHR, controlled by billionaire Mark Rachesky, was Lions Gate's largest stockholder, with a 27% stake before the announcement.

The tie-ups with Discovery and Liberty Global potentially opens up routes to new growth for Lions Gate, the studio behind popular TV series such as "Mad Men" and "Orange Is the New Black." Analysts have speculated that Lions Gate could be involved in any plan by Mr. Malone -- who joined the board earlier this year -- to roll up content companies.

"Our business is becoming more and more global and the opportunity to have them on our board, to have them investing in our company and to work on a number of the strategic alliances that we talked to them about, are really, really significant," Lions Gate CEO Jon Feltheimer said Tuesday on an earnings call.

As part of the deal, Discovery, the owner of the cable channels TLC and Animal Planet, and Liberty Global reached separate commercial agreements to license rights for Lions Gate's films and TV programs.

Discovery CEO David Zaslav and Liberty Global's Mike Fries will join Lions Gate's board.

The agreements make "tactical sense," said Matthew Harrigan, an analyst at Wunderlich Securities. "Lions Gate does not own much in network content."

On Nov. 20, the company releases the last of the films in "The Hunger Games" series.

In February, Mr. Malone's Starz pay-TV network formed an alliance with Lions Gate, giving the cable magnate a 3.4% stake in the company.

Mr. Malone's Liberty Global, which has spent more than $51 billion expanding in Europe over the past decade, has been buying content assets so it can hold the rights to TV programs and movies instead of just owning the cable pipes that distribute them.

Liberty Global already owns 9.9% in ITV, a London-based commercial broadcaster and production house, and last year teamed up with Discovery to buy U.K.-based TV producer All3Media. The two companies earlier this year also bought into the new Formula E electric series.

Mr. Rachesky remains chairman of Lions Gate. In addition, MHR Fund Management principal Emily Fine will join the board.

-- Bloomberg News

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