UPDATE 1-Liberty spinoff Starz up 10 pct in first day of trading

Mon Jan 14, 2013 6:43pm EST

* Shares end nearly 10 pct higher on first trading day

* Starz has $1.1 bln debt, access to $450 mln more

* Starz is potential acquisition target - analyst

* Shares close nearly 10 pct higher

By Liana B. Baker

Jan 14 (Reuters) - Starz Entertainment ended its first day of trading nearly 10 percent higher on Monday following Liberty Media's spin off last week of the company known for its premium movie channels.

The shares finished up $1.39, or 9.79 percent at $15.59 a share.

Liberty announced in August that Starz, which runs eponymous movie and TV channels, as well as the Encore movie channels, would become a separate listed company.

Starz currently has about $1.1 billion of debt and access to a $450 million bank credit facility, the company said in a statement late on Friday.

Some board members of the company include influential music executive, Irving Azoff, former DirecTV chief programmer Derek Chang, CEO Christopher Albrecht, Gilt Group founder and chairman Susan Lyne and Warner Music group chief operating officer Robert Wiesenthal.

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. 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.

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.

Greg Maffei, the CEO of Liberty Media, said at an investor conference last week, "I don't know whether Starz gets sold," but he also talked about a hypothetical scenario in which Netflix could acquire it.

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

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 Inc swooped in to sign its own contract with Walt Disney Co. 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. It is close to bringing its stake in Sirius XM Radio Inc above 50 percent, while it has also been increasing its investment in Live Nation Entertainment Inc .

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

How to get out of debt

Financial adviser Eric Brotman offers strategies for cutting debt from student loans and elder care -- and how to avoid money woes in the first place.  Video