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Analyst Ups AMC Networks Rating on New Starz Merger Scuttlebutt

12 Apr, 2013 By: Erik Gruenwedel

B. Riley & Co. analyst David Miller upped his “sell” rating on AMC Networks to “neutral,” based in part on renewed speculation regarding a possible merger between the premium channel and rival Starz’ Encore movie channel.

Starz, which was spun off by Liberty Media in January, has more than 55 million subscribers among its Starz and Encore movie channels. Original programming includes the “Spartacus” and “Magic City” franchises.

AMC, which was spun off by Cablevision in 2011, is the broadcast home of original series “Mad Men,” “Breaking Bad” “The Walking Dead,” “The Killing” and “Hell on Wheels,” among others.

Speculation regarding a possible merger between AMC and Starz first surfaced a year ago, and gained additional momentum last fall when Liberty CEO Greg Maffai told an investor group that Starz was probably more valuable to a third party than as a standalone venture.

It wasn’t immediately clear what new information regarding Encore possibly joining forces with AMC led Miller to change his rating.

“The possibility of a Starz Encore-AMC merger forces us into a more sanguine view of the story,” he wrote in an April 12 note. “With that, our 12-month target moves to $61 from $47 [per share].”

Meanwhile, AMC Networks, which includes AMC, IFC, We tv and Sundance Channel, has a SVOD deal with Netflix — the latter ending a similar streaming agreement with Starz in February 2012.

Starz, which has exclusive pay-TV distribution rights to Walt Disney Studio and Sony Pictures titles, recently re-upped with Sony Pictures after losing Disney rights to Netflix beginning in 2017.

“Starz is still a valuable asset, but it's injured losing the Disney contract,” fund manager Matt Kaufler told DenverPost.com last December. “Starz has already pushed into some original content, but it's still in a fairly embryonic stage. The market isn't going to reward them. There's nothing there yet. It should sell at a discount.”



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