Putting an end to all speculations, Lions Gate Entertainment Corp. (LGF - Analyst Report) officially announced the acquisition of media and entertainment company Starz (STRZA - Snapshot Report) . The cash and stock deal is valued at $4.4 billion or $32.73 per share. The company which produced The Hunger Games movie franchise and TV series like Mad Men and the Orange Is the New Black, is paying roughly 16% premium to the closing price of Starz stock as of Jun 29.

Boards of directors of both companies have approved the deal. However, the deal is pending approval from shareholders of the companies as well as regulatory authorities. The buyout is expected to be closed by the end of 2016.

In 2013, Liberty Media Corp. (LMCA - Analyst Report) completed the spin-off of its Starz Entertainment segment into a separate entity. The company has been in buyout rumors ever since, with speculations that CBS Corporation (CBS - Analyst Report) , Lions Gate, AMC Networks Inc. (AMCX - Snapshot Report) and Twenty-First Century Fox, Inc. (FOXA - Analyst Report) were interested in adding this media and entertainment business to their portfolio.

Starz is a 22-year old American company engaged in premium cable and satellite television network business. The company’s programing primarily features theatrically-released motion pictures as well as few first-run original television series. The company also provides superior entertaining premium subscription video programming as well as related on-demand and online services. Starz TV and Starz Encore channels have 24 million and 32.4 million subscribers, respectively, worldwide.

Growth Opportunities for Lions Gate

Lions Gate is finally acquiring Starz. Now it remains to be seen if the deal can help the stock revert to its growth track after plunging more than 45% in the past one year period. Let’s delve in deeper.

Given that Lions Gate is largely depended on the movie businesses for its earnings, Starz’s solid affiliate-fee-based income stream should prove to be highly beneficial for it. The deal will not only increase the content creation abilities but will also firm Lions Gate’s position in premium scripted programming. The takeover will also increase the merged company’s international distribution reach in broadband, mobile, cable satellite platforms and cable.

After the acquisition of Starz, Lions Gate will become the leading independent television business in the world. The acquirer will cover 16,000-title film and television library comprising 87 original series, as well as a feature film business that garnered more than $7 billion over the last four years at the box office.

Lions Gate is well known for undertaking strategic acquisitions and alliances to enhance its competitive position, maximize return, and build a diversified portfolio for future growth. We believe that the addition of Starz will not only help the company become a major player in the TV space but will also help it to recapture some of its lost ground in streaming network.

Lions Gate currently has a Zacks Rank #4 (Sell). The motion picture industry is highly competitive. Hence, companies like Lions Gate have to continually strive to maintain their share of box office receipts. This is because if the other players release a significant number of motion pictures, Lions Gate runs the risk of witnessing a decline in its share of box office receipts. Moreover, a limited supply of motion picture screens also makes matters difficult for the company.