Lionsgate-Starz Merger Threatened by New U.S. Tax Inversion Rules, Analyst Says

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Curbs on U.S. firms using a international address to decrease their tax monthly bill could thwart John Malone’s media mashup involving the ‘Hunger Games’ studio.

New U.S. Treasury Section curbs on tax inversions threaten any probable merger concerning Starz and Lionsgate, a Morgan Stanley analyst warned Tuesday.

The U.S. Section of Treasury on Monday unveiled new constraints on American firms moving abroad for decreased tax prices.

Benjamin Swinburne, an analyst at Morgan Stanley Analysis, in an investors’ be aware mentioned the new curbs on U.S. firms using a international address to decrease tax expenditures would “decrease Lionsgate’s means to decreased Starz’s company tax level down to Lionsgate’s mid-teenagers level…especially since the large vast majority of Starz’s earnings come from domestic functions.”

Spokesmen at both of those Lionsgate and Starz declined to comment on the U.S. using motion against tax inversions, and any affect on their merger and acquisition procedures.

Lionsgate, which has a Canadian domicile, before verified negotiations with Starz as Liberty Media’s John Malone, who has a controlling stake in Starz, eyes a cross-border merger to steer clear of the U.S. tax net.

“…The rules could weigh on extended-phrase programs if these a mixture have been supposed to be the 1st phase in a probable broader Lionsgate strategy to use tax synergies to roll up lesser cap ‘free radical’ U.S. media firms,” Swinburne mentioned. Final calendar year, Malone 1st talked about Lionsgate purchasing Starz and other “no cost radical” U.S. firms as aspect of a broader market consolidation.

Malone at the time swapped a part of his stake in Starz for a bit of The Hunger Online games studio. That investment adopted speculation that Starz was on the lookout to promote alone to a even bigger enterprise, with some analysts viewing that as a precursor to a hookup concerning the cable enterprise and Lionsgate.

A merger of Lionsgate and Starz is not assumed to be imminent.

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