Legendary Entertainment may be looking to acquire Lionsgate Studios, which has just spun off on its own ticker on Wall Street.It’s very early days. Lionsgate just split in half last month with Starz going one way, Lionsgate Studios the other, precisely so that either, or both, could be primed for M&A.What’s clear is that Lionsgate and Legendary are at a minimum having conversations around a couple of feature co-productions that could be a litmus test in regards to seeing how the two companies jam together, and where to take it from there.Bloomberg was first to report the feelers from Legendary. Deadline hears that other parties have also reached out to Lionsgate, which, again, should not be surprising as the media industry appears on the cusp of a new era of dealmaking and Lionsgate Studios is now flying solo. There had been interest in the mini-major before the split, but potential buyers balked at having to swallow Starz along with the studios.Lionsgate, led by CEO Jon Feltheimer and vice chairman Michael Burns, has been informally on and off the block for years and executive were quite attentive when Amazon acquired MGM for $8.5 billion in 2022, when most believed Amazon overpayed.Legendary Entertainment is the co-financier of big franchises, largely at Warner Bros, like Dune ($1.1 billion), the Monsterverse and this year’s A Minecraft Movie ($955.1M). Lionsgate is the studio behind such notable franchises as John Wick, The Hunger Games, Saw, Twilight and the Divergent series, with some award-winning titles in 20,000-plus-title library, i.e., Monster’s Ball and La La Land.Lionsgate shares jumped 20% today on the Legendary report to close at $7, with a market cap of $2 billion. Overall, its shares have not popped since the split as management had hoped they would — a fact that could discourage the board from selling at this point even with a big premium. Starz shares have performed significantly better since the separation.One issue that’s dogged a studio sale is that a buyer wouldn’t be getting 100% ownership of the cash-rich library. The studio offloads its foreign films in order to run a more risk-free, ideally profit-margin type of business. More specifically, while Lionsgate may ‘own’ a John Wick, Hunger Games, they’re licensed out for myriad years. Meaning, the studio isn’t earning a cash flow on such licensed properties in a way that rivals studios (which fully own their movies do). It’s why neither Disney nor Apple nor anyone else has scooped up Lionsgate yet. That said, such a setup may not be a big deal for Legendary since the producer is already in the partial rights IP space, owning anywhere from 20%-50% of the movies they co-fund and co-produce. And the complication may be overstated. Basically, it’s mostly big Hollywood studios that have rights free and clear, while most smaller producers need to carve them up. Lionsgate owns North American rights on their movies and has a 50/50 deal with Latin America.There may also be some angst around the film slate, with Ballerina underperforming and questions swirling around a flagship Michael Jackson biopic. But The Hunger Games: Sunrise on the Reaping is on the horizon.The real secret to Lionsgate’s success in a streaming-obsessed town where major studios laid billions on the line to launch their own OTT services is that they’ve remained an arms dealer in TV and film, a provider of content.Lionsgate counts a staff of 1,400 around the globe. Legendary has 180 employees. Legendary management and Apollo, which invested $760 million in Legendary in 2022, co-own the company and the board is evenly split. That structure was set in 2024 after management completed a buyout of Wanda Group’s remaining equity interest in a move CEO Josh Grode told Deadline then would usher in a new era for the studio.“The purchase of Wanda’s remaining ownership interest is the next strategic step in Legendary’s long-range growth plan. With our outstanding creative team, headed by Mary Parent, developing, producing, and marketing high-quality film and television and working with leading artists remains core to our expansion,” said Grode at the time. “I look forward to continuing to work closely with the Apollo team as we build on Legendary’s strong momentum together.” Aaron Sobel and Lee Solomon, partners at Apollo, praised Grode and Parent and called Legendary “an outstanding platform for future growth that is well positioned to thrive as the entertainment industry continues to evolve.”Evolve it has. Lionsgate Studios completed its drawn out separation from Starz in May with both becoming stand-alone, publicly traded companies.Specifically, Bloomberg reports that Grode told the media outlet that plans are in the works to use Apollo’s monies toward entertainment industry takeovers in the billions of dollars range. Private equity giant Apollo was one of the suitors last year for Paramount Global before David Ellison’s Skydance Media prevailed.Legendary and Lionsgate declined comment today.With deal speculation set to heat up, another twist is Steven Mnuchin, the Secretary of the Treasury during President Trump’s first term and a former Goldman Sachs banker. He’s amassed a large stake in Lionsgate through his Liberty Strategic Capital, a Washington, D.C.-based private equity firm. Most recently, he was up to 12.6% and continued to add to his position as recently as last week, according to an SEC filing. It’s not clear what the end game is. In a press release June 17 announcing it had reached the 10% threshold, Liberty said it “intends to review such investment in Lionsgate Studios on a continuing basis and, depending on Lionsgate Studios’ performance and other market conditions, increase or decrease its investment position.”Lionsgate chairman Mark Rachesky is also a major shareholder.In May, the Lionsgate board adopted a one-year shareholder rights plan, or a so-called poison pill, which aims to protect companies against hostile takeovers.
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