Starz Stock Spikes in After-Hours Trading on Acquisition Rumors

Shares of pay cable group Starz jumped more than 7% in after-hours trading Tuesday after Bloomberg News reported that AMC Networks was in talks to acquire the company.

Sources close to the situation strongly denied that any substantive negotiations are under way. The companies have flirted with deal talks in the past but at present there are no active discussions, according to a source. AMC declined to comment. Starz said in a statement: “As per company policy, we do not comment on rumors or speculation.”

But acquisition talk has surrounded Starz for the past few years, ever since it was spunoff from Liberty Media as a stand-alone public entity in late 2012. Liberty chairman John Malone retains a sizable stake in Starz — a personal holding of Malone’s, separate from Liberty — and he has fueled Starz acquisition rumors with his recent moves. In February, Malone swapped some of his shares in Starz for a 3.4% stake in Lionsgate, which also brought him a seat on the studio’s board. Since then, Malone hasn’t been shy about suggesting that Starz could merge with the Santa Monica-based film and TV studio.

Malone told Bloomberg last week that he saw Starz as a “terrific, synergistic fit” with Lionsgate, although he emphasized that the ultimate decision would rest with the boards of both companies.

AMC Networks, controlled by the Dolan family, has been in growth mode in recent years. Both AMC and Starz invest heavily in original series production and movie licensing pacts, so there’s a case to be made for the two coming together.

Starz shares were up 1.4% at the close of trading Tuesday to $38.79. In after-market activity, shares climbed 7% to $41.49 following the Bloomberg News report.

The high valuation of Starz at present could be a hurdle for any deal. The company’s shares have run up in the past 18 months on persistent acquisition rumors. And Starz has been on a roll of late with original series such as “Outlander,” “Power” and comedy “Blunt Talk” generating some pop culture traction for the flagship channel. The company’s profitability has improved as it has eased out of high-priced movie output deals in favor of investments in original series.

Starz is comprised of 13 Starz- and Encore-branded channels. AMC Networks is the home of AMC, SundanceTV, IFC, We TV and BBC America. It has a growing international portfolio of channels as well.

AMC shares didn’t move much in after-market trading. The stock closed Tuesday at $74.14, up 2.5%.

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