Brean Capital Sees Arbitrage Opportunity in Lions Gate (LGF)/Starz (STRZA) Deal
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Brean Capital analyst Alan Gould reiterated his Buy rating and $27 price target on Lions Gate (NYSE: LGF) noting a potential an arbitrage opportunity exists between LGF and STRZA based on their belief that there will be a 5-10% spread between the LGF voting and non-voting shares immediately after the deal closes.
Gould commented, " At the mid-point, this creates a 1.7% arbitrage spread for a deal that should close in a little more than 2 weeks. LGF operates in the sweet spot of the media business focused on content creation and management has a strong acquisition track record. The cost and LGF's unique tax synergies make the Starz (STRZA $34.02, Hold) deal quite accretive. The stock should be driven by the more predictable cash flow and de-leveraging once the $4.4 billion Starz deal closes. The stock now trades at 13.3x next year's "cash" EPS (reported EPS adding back only the intangible amortization from the Starz deal)."
Shares of Lions Gate closed at $23.67 yesterday.
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