I had posted a few days ago about the Sony possibility of acquiring Lionsgate, but recent movement has me leaning more towards Netflix again for a few reasons (my overall belief has always been that NFLX *should* acquire LION).
Here are some key things that have happened in the last few days:
FMR LLC, the corporate parent of Fidelity Investments, one of the world's largest assetmanagers (managing over $5 trillion, and who I personally use as a brokerage). Filed yesterday that they had taken a large stake in LION (as others posted). FMR files as a "passive" investor (Schedule 13G), meaning they aren't seeking board seats or an activist fight. However, their sheer size means management teams listen to them intently, not suprisingly, Fidelity is a top shareholder in Netflix (owning ~5.1%), meaning they would effectively be "paying themselves" if Netflix acquired Lionsgate. This reduces friction for a deal because a major shareholder of both companies is likely to vote "yes," on an acquisition.
A critical item broke today; A critical piece of information broke today, May 5, that supports this thesis:
Analysts at Robert W. Baird just raised their price target for Lionsgate to $16.00. Analysts often get info before retail investors. Raising a target to the specific range of a likely buyout premium ($16–$17) just 48 hours before a poison pill expires is highly suspicious in a positive way. It suggests the Street expects a value realisation event as many of us suspected.
Netflix is bracing for a pullback on technicals, but it has also started share buyback again, which effectively reduces market volatility and increases their value per share in the event of market manipulation. In addition, they had done the same right before entering into a bid for WBD, and it is a sign they feel their stock is valuable.
Netfilx received the break-up fee from PSKY, and this funds a major portion of the purchase price of LION should they move in that direction. Because Netflix can pay with cash on hand (~$5B). It’s an accretive deal, it adds revenue immediately without adding new share count. With the WBD/Paramount merger moving forward, the market for independent IP libraries is shrinking rapidly. If Netflix doesn't buy Lionsgate now, they risk losing the last major independent library to Legendary/Apollo (or Sony), effectively locking themselves out of the legacy studio game. While Legendary Entertainment was "kicking the tires" in headlines months ago, they have gone quiet and have seemingly entered into alliances with PSKY, which would be counterintuitive to absorb LION.
Lionsgate appoints a new global presence: Worldwide Television & Digital Distribution with the elevation of executives, Michael Viane (Theatrical) and the just-announced Amanda Kozlowski (Marketing).
When a company about to be sold strengthens its distribution leadership, despite their position on the Town last week where they discussed how "amazing their international partnership is with other plays (i.e Universal). Netflix presence is solid in the international market. Netflix's growth is now almost entirely international. Hiring an exec with strong global ties signals that Lionsgate's assets are ready to merge with Netflix's global operations.
Narnia VS Hunger Games
The Hunger Games: Sunrise on the Reaping is locked for November 20, 2026. Greta Gerwig’s Narnia was originally set for an IMAX release, Thanksgiving 2026 slot (Nov 26). Releasing two massive fantasy prequels targeting the exact same demographic in the same week would have been box-office suicide. NETFLIX announced recently they were pushing Narnia to February 12, 2027, for full theatrical, and Netflix not only avoids the conflict but secures its own "blue ocean" window, similar to how Black Panther or Deadpool capitalized on February releases. This confirms they are now thinking like a traditional studio distributor, and perhaps not wanting to compete within the same genre (ie OBAA vs Sinners).
Potential for Gaming:
In late 2024ish, Netflix shut down "Team Blue," their internal AAA studio that was trying to build big games from scratch. They realised building a Call of Duty competitor internally was too expensive and slow. They have intelligently decided to "Cloud-First" and "IP Licensing." They want to take massive, established IPs (like GTA) and stream them to TVs. Lionsgate could be a legit fit? Lionsgate recently announced a AAA John Wick game (developed by Saber Interactive). If Netflix buys Lionsgate, they inherit this project. Instead of spending $200M to build a game studio, they simply buy the studio (Lionsgate) that owns the IP (John Wick, Borderlands, Twilight, Hunger Games, Housemaid) and the licensing deals. It gives them instant content to capitalise on a market that everyone has said has massive potential without the expense of outrageous IP costs.
Netflix’s move into supporting theatres (specifically with Narnia) and recent industry analysts to prompt with titles like "HELL HAS FROZEN OVER, NETFLIX DOES THEATRES," would be wildly intelligent if you are making a play for a studio like LIONSGATE who just had massive success with Michael and The Housemaid.
Eventising: You cannot launch a massive video game franchise from a straight-to-streaming movie, series maybe, but even then its harder. Games require major engagement. Theatrical releases create the cultural event (the hype, the merchandise, the buzz) that makes players want to engage with the game. Supporting theaters isn't just about box office cash; it's about generating the IP heat necessary to make their gaming division viable, as well as their new verticals that went live today.
Finally, regulatory hurdles. LION poses much less in this regard. Sarandos was just seen on INSTA meeting with congresswomen about increasing jobs and supporting the film industry from both sides of the political spectrum. LION and NFLX is a vertical merger. In vertical integration, Netflix (distributor) is buying a supplier (the studio). Historically, vertical deals are much harder for the government to block because they don't remove a retail choice for consumers; they just secure a supply chain. Netflix may be greasing the wheels with those who sought to oppose them before.
Lionsgate is a "mini-major." Buying them doesn't make Netflix a monopoly; it simply gives them the tools (distribution and IP) to compete on a level playing field with Disney and the new Paramount/Skydance/WBD entity. Regulators often approve these deals because they actually increase competition against the dominant "Mega-Majors." This is the very thing that PSKY/WBD is being accused of interfering with. This gives LION and NFLX a better chance in this arena.
*this is speculation, and working theory. I am following LION closely and am a long time media investor. There is something brewing with LION for sure, and the timing of the pill is looming.