UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 11, 2017
Lions Gate Entertainment Corp.
(Exact name of registrant as specified in charter)
British Columbia, Canada
(State or Other Jurisdiction of Incorporation)
| (Commission File Number) 1-14880 | (IRS Employer Identification No.) N/A |
(Address of principal
executive offices)
250 Howe Street, 20th Floor
Vancouver, British Columbia V6C 3R8
and
2700 Colorado Avenue
Santa Monica, California 90404
(Registrant’s telephone number, including area code) (877) 848-3866
__________________NO CHANGE__________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01. Completion of Acquisition or Disposition of Assets.
On May 11, 2017, Lions Gate Films Holdings Company #2, Inc. (“Lions Gate”), a California corporation and a wholly-owned subsidiary of Lions Gate Entertainment Corp. (“LGEC”), a corporation organized and existing under the corporate laws of British Columbia, completed the previously announced sale of its 31.15% interest in Studio 3 Partners LLC, a Delaware limited liability company (the “Company”) pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) dated April 5, 2017 entered into among Lions Gate, Viacom International Inc., a Delaware corporation (“VII”), Paramount NMOC LLC, a Delaware limited liability company (“Paramount”, and together with VII and Lions Gate, the “Sellers”), and Metro-Goldwyn-Mayer Studios Inc., a Delaware corporation (“MGM”).
Each of Lions Gate, VII and Paramount sold to MGM (the “Purchase”) one hundred percent (100%) of their respective equity interest in the Company, representing, in the aggregate, a 80.91% interest in the Company (“Transferred Interests”). Prior to the Purchase, MGM, Lions Gate, VII and Paramount were joint venture partners in the Company. As a result of the Purchase, MGM now holds one hundred percent (100%) of the equity interests in the Company.
In consideration for the Transferred Interests, the Sellers received an aggregate amount of $1,031,602,500. Lions Gate sold to MGM its 31.15% interest in the Company in consideration for $397,166,700 which was paid as follows: (1) $23,362,500 was paid between the signing of the Purchase Agreement and the closing of the Purchase (the “Closing”) as a member distribution, and (2) $373,804,200 was paid upon Closing. Additionally, the Purchase Agreement provides that the Sellers may be entitled to receive additional payments in the event that MGM effects one or more sales of equity securities or assets of the Company meeting certain requirements during a specified time period for consideration on a per unit basis above an agreed upon dollar threshold.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 2.1 to the Current Report on Form 8-K filed by LGEC on April 5, 2017 and is incorporated herein by reference. Certain schedules and annexures to the Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. LGEC agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or annexure upon request.
Item 9.01 Financial Statements and Exhibits.
(b) Pro forma financial information
The pro forma financial information of LGEC for the sale by Lions Gate of its interest in the Company required by this Item 9.01 is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The unaudited pro forma condensed consolidated balance sheet information as of December 31, 2016 has been prepared as if the sale by Lions Gate of its interest in the Company occurred on that date. The unaudited pro forma condensed consolidated statement of income information for the fiscal year ended March 31, 2016 has been prepared as if the sale by Lions Gate of its interest in the Company occurred on April 1, 2015, and the unaudited pro forma condensed consolidated statement of operations information for the nine months ended December 31, 2016 has been prepared as if the sale by Lions Gate of its interest in the Company occurred on April 1, 2016.
(d) Exhibits
The following exhibits are being included as part of this report:
| Exhibit No. | Description | |
| Exhibit 2.1 |
Membership Interest Purchase Agreement dated April 5, 2017 among Lions Gate Films Holdings Company #2, Inc., Viacom International Inc., Paramount NMOC LLC, and Metro-Goldwyn-Mayer Studios Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Lions Gate Entertainment Corp. on April 5, 2017) | |
| Exhibit 99.1 | Unaudited Pro Forma Financial Information |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LIONS GATE ENTERTAINMENT CORP. | ||
| Date: May 15, 2017 | /s/ Wayne Levin | |
| Wayne Levin | ||
| General Counsel and Chief Strategic Officer |
Exhibit 99.1
Unaudited Pro Forma Financial Information
In April 2008, Lions Gate Entertainment Corp. (“Lions Gate” or the “Company”), through its wholly owned subsidiary, Lions Gate Films Holdings Company #2, Inc. formed a joint venture with Viacom International, Inc., its Paramount NMOC LLC (“Paramount”) and Metro-Goldwyn-Mayer Studios Inc. (“MGM”) to create a premium television channel and subscription video-on-demand service named “EPIX,” through the formation of Studio 3 Partners, LLC (“EPIX”). On May 11, 2017, pursuant to the Membership Interest Purchase Agreement dated April 5, 2017 (the “Purchase Agreement”), Lions Gate Films Holding Company #2, Inc., Viacom and Paramount, each completed the sale to MGM of 100% of their respective equity interests in EPIX, representing, in the aggregate, an 80.91% interest in EPIX, for approximately $1.032 billion. Lions Gate’s 31.15% equity interest in EPIX, which it held through Lions Gate Films Holdings Company #2, Inc. represented approximately $397.2 million of the sale, of which $23.4 million was paid to Lions Gate between the signing of the Purchase Agreement and the closing of the sale as a member distribution, and $373.8 million was paid upon closing. Prior to the sale of its 31.15% interest in EPIX, the Company had accounted for such interest as an equity method investment.
Based on the estimated carrying value of the Company’s interest in EPIX as of the date of closing and estimated transaction expenses, the Company is estimating a gain before income taxes of approximately $203.9 million which is expected to be recognized during the quarter ended June 30, 2017. The after-tax gain is estimated to be $128.5 million. The tax charge on the gain is a non-cash deferred charge for the use of the Company’s existing net operating loss carryforwards. The actual amount of the gain will be impacted by the change in carrying value of the investment through the date of closing.
A limited number of pro forma adjustments are required to illustrate the effects of the sale of Lions Gate’s equity interest in EPIX on the Company’s unaudited consolidated balance sheet as of December 31, 2016, and the Company’s unaudited consolidated statements of operations for the nine months ended December 31, 2016, and the Company’s consolidated statement of income for the fiscal year ended March 31, 2016. The following narrative description is furnished in lieu of unaudited pro forma consolidated financial statements.
The pro forma adjustments described below are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations for future periods or the results that would have been achieved if the Company had completed the sale of its 31.15% equity interest in EPIX on the dates indicated. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made. The unaudited pro forma financial information should be read in conjunction with the historical financial statements and related notes of Lions Gate.
Balance Sheet as of December 31, 2016 and Statement of Operations for the Nine Months Ended December 31, 2016:
| · | Balance Sheet. Had the transaction occurred on December 31, 2016, the pro forma balance sheet at December 31, 2016 would have reflected the following pro forma adjustments: (a) an increase in the cash and total current assets balance by $393 million, to $988 million and $2.263 billion, respectively; (b) a reduction in the investments balance by $179 million, to $178 million; (c) an increase in the deferred tax liabilities balance by $77 million, to $538 million; and (d) an increase in retained earnings by $136 million to $84 million. The increase in retained earnings represents the gain, net of tax, calculated as if the transaction would have occurred as of December 31, 2016. As of December 31, 2016, pro forma total assets and total shareholders’ equity would have been $9.594 billion and $2.458 billion, respectively. |
| · | Statement of Operations. Had the transaction occurred on April 1, 2016, the pro forma statement of operations for the nine months ended December 31, 2016 would have reflected pro forma adjustments to reduce equity interest income by $21 million, to a loss of $10 million, and increase the income tax benefit by $8 million, to $100 million. Pro forma net loss and pro forma net loss attributable to Lions Gate Entertainment Corp. shareholders would have been $60 million for the nine months ended December 31, 2016. Pro forma basic and diluted net loss per share would have decreased $0.09 per share to a net loss of $0.40 per share. The expected gain on the transaction is excluded from the pro forma statement of operations information because it is non-recurring. |
Statement of Income for the Year Ended March 31, 2016:
| · | Statement of Income. Had the transaction occurred on April 1, 2015, the pro forma statement of income for the year ended March 31, 2016 would have reflected pro forma adjustments to reduce equity interest income by $52 million, to a loss of $8 million, and increase the income tax benefit by $19 million, to $96 million. Pro forma net income and pro forma net income attributable to Lions Gate Entertainment Corp. shareholders would have been $10 million and $17 million, respectively, for the fiscal year ended March 31, 2016. Pro forma basic and diluted net income per share would have decreased $0.22 per share to $0.12 per share and $0.11 per share, respectively. The expected gain on the transaction is excluded from the pro forma statement of income information because it is non-recurring. |