Liberty spin-off Starz rises in first day of trading

Mon Jan 14, 2013 11:38am EST

Jan 14 (Reuters) - Starz Entertainment started trading as its own publicly-traded stock on Monday after Liberty Media completed the spin-off of the company known for its premium movie channels late last week.

Shares rose $1.03 or 7.3 percent to $15.23 on Monday.

Liberty announced in August that Starz, which runs eponymous movie and TV channels as well as Encore-branded movie channels, will become a separate listed company with about $1.5 billion of debt. Starz now has a $450 million bank credit facility, the company said in a statement late Friday.

Analysts view Starz, which competes with HBO and Showtime, as a potential acquisition target. The Starz channel has 21 million subscribers, while Encore has 34 million subscribers. Macquarie analyst Amy Yong estimates that HBO, the leader in premium TV which is owned by Time Warner Inc, has 39.5 million subscribers and that CBS-owned Showtime has 21.3 million subscribers.

Macquarie's Yong said in a research note that a large media company could help improve Starz' margins by "more extensive distribution, producing more content hours" and by commanding "higher rates in affiliate negotiations."

Janney analyst Tony Wible called movie channel Epix "an ideal buyer" for Starz, also in a research note.

Epix is a pay-TV movie channel jointly owned by Viacom's Paramount Pictures, Metro-Goldwyn-Mayer Pictures and Lions Gate Entertainment.

ISI analyst Vijay Jayant estimates Starz will generate revenue of $1.62 billion in 2012 and in 2013. Starz receives about 80 percent of its revenue from affiliate fees from cable companies, Jayant said.

In December, Starz did not renew an exclusive agreement to carry Disney's movies and Netflix swooped in to sign its own contract with Disney. Starz has been focusing on developing original programming such as "Spartacus," a drama set in ancient Rome, and mob drama "Magic City," set in Miami in 1959.

Liberty Media, the former parent company of Starz, has been tweaking its portfolio in recent months. It is close to bringing its stake in Sirius XM Radio above 50 percent while it has also been increasing its investment in Live Nation Entertainment.

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