Zacks_Analysts' Blog : Lionsgate Sells Maple Pictures - Analyst Blog

Lions Gate Entertainment Corp. (LGF) recently announced the sale of its Canadian distributor Maple Pictures to the Alliance group for approximately $38.5 million.

The deal subject to the approval by the Canadian regulatory authorities, allows the Alliancegroup to acquire Maple and its film library. Further, Alliance group will take charge of Maple's exclusive long-term output deals with Lionsgate of Film, TV, Home Entertainment and Library.

Moreover, the recent announcement will help Lionsgate to further fortify its distribution network. Maple’s co-founders, Laurie May and Brad Pelman, will be joining the Alliance team.

A month before, Lionsgate reported mixed fourth-quarter 2011 results. The company posted quarterly earnings of 33 cents a share, a noticeable recovery from a loss of 19 cents a share in the prior-year quarter. The analysts covered by Zacks had expected Lionsgate to deliver earnings of 17 cents a share.

Lionsgate's sturdy cable VOD performance, robust international and digital sales, remarkable jump in equity interest income and abridged theatrical marketing costs helped it to break its loss series and enter into profit after registering losses in the past three consecutive quarters.

Lionsgate always seeks strategic acquisitions and alliances for enhancing its competitive position to maximize return and build a diversified portfolio for future growth. The company’s endeavors include acquisition of TV Guide Network and TV Guide Online properties, and creation of new premium channel called EPIX in a joint venture with MGM and Viacom.

To mitigate the risk related to film production, Lionsgate entered into co-production agreements to share costs with other parties involved in production or pre-sells international distribution rights before the completion of the film. Moreover, keeping production costs low often involves paying talent low upfront salaries and awarding financial participation in a film’s profits.

To grab its share of box office receipts, Lionsgate competes with other major studios such as Fox Entertainment Group, Paramount Motion Pictures Group and Time Warner Inc. (TWX).

Currently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Lionsgate holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating