Mergers and Acquisitions (Tables)

9 Months Ended

Dec. 31, 2016

Summary of Estimated Purchase Consideration

The following table summarizes the components of the estimated purchase consideration, inclusive of Lions Gate’s existing ownership of Starz common stock and Starz’s share-based equity awards outstanding as of December 8, 2016:



			(Amounts in millions)
Market value, as of December 8, 2016, of Starz Series A and Series B common stock already owned by Lionsgate⁽¹⁾			$	179
Cash consideration paid to Starz stockholders
Starz Series A common stock at $18.00	$	1,077
Starz Series B common stock at $7.26	53
			1,130
Fair value of Lionsgate voting and non-voting shares issued to Starz's stockholders
Starz Series A common stock at exchange ratio of 0.6784 Lionsgate non-voting shares	$	1,044
Starz Series B common stock at exchange ratio of 0.6321 Lionsgate voting shares	122
Starz Series B common stock at exchange ratio of 0.6321 Lionsgate non-voting shares	118
			1,284
Replacement of Starz share-based payment awards⁽²⁾			187
Liability for dissenting shareholders			886
Total preliminary estimated purchase consideration			$	3,666

(1)The difference between the fair value of the Starz available-for-sale securities owned by Lionsgate and the original cost of the Starz available-for-sale securities of $159 million, of $20 million, has been reflected in the gain on Starz investment line item in the unaudited condensed consolidated statement of operations for the three and nine months ended December 31, 2016. See Note 4.

(2)Upon the closing of the merger, each outstanding share-based equity award (i.e., stock options, restricted stock, and restricted stock units) of Starz was replaced by a Lions Gate non-voting share-based equity award (“Lions Gate replacement award”) with terms equivalent to the existing awards based on the exchange ratio set forth in the Merger Agreement. Each Starz outstanding award was measured at fair value on the date of acquisition and the portion attributable to pre-combination service was recorded as part of the purchase consideration. The fair value of the Lions Gate replacement award measured on the date of acquisition in excess of the fair value of the Starz award attributed to and recorded as part of the purchase consideration was attributed to post-combination services and will be recognized as share-based compensation expense over the remaining post-combination service period. The estimated aggregate fair value of the Lions Gate replacement awards to be recorded as part of the purchase consideration is $187 million, and the estimated remaining aggregate fair value totaling $43 million will be recognized in future periods in accordance with each respective award’s vesting terms. The fair value of the Lions Gate replacement restricted stock and restricted stock unit awards was determined based on the value estimated for the Class A voting shares and Class B non-voting shares as of the acquisition date as discussed above. The fair value of Lions Gate replacement stock option awards was determined using the Black-Scholes option valuation model using the estimated fair value of the Class B non-voting shares underlying the replacement stock options. For purposes of valuing the Lions Gate replacement awards, the following weighted-average applicable assumptions were used in the Black-Scholes option valuation model:



Weighted average assumptions:
Risk-free interest rate	0.00% - 1.83%
Expected option lives (years)	0.01 - 5.50 years
Expected volatility	35%
Expected dividend yield	0%

Fair Value Assumptions in Replacement Awards

For purposes of valuing the Lions Gate replacement awards, the following weighted-average applicable assumptions were used in the Black-Scholes option valuation model:



Weighted average assumptions:
Risk-free interest rate	0.00% - 1.83%
Expected option lives (years)	0.01 - 5.50 years
Expected volatility	35%
Expected dividend yield	0%

Purchase Price Allocation

The preliminary estimated purchase price of Starz has been allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value as follows:



	(Amounts in millions)
Cash and cash equivalents	$	73
Accounts receivable	257
Investment in films and television programs and program rights	843
Property and equipment	121
Investments	12
Intangible assets	2,021
Other assets	128
Accounts payable and accrued liabilities	(114		)
Corporate debt and capital lease obligations	(1,016		)
Deferred tax liabilities	(701		)
Other liabilities	(157		)
Fair value of net assets acquired	1,467
Goodwill	2,199
Total estimated purchase consideration	$	3,666

Starz

Business Acquisition [Line Items]

Pro Forma Statement of Operations Information

The following unaudited pro forma condensed consolidated statements of operations information presented below illustrate the results of operations of the Company as if the Starz Merger and related debt financing (see Note 6) occurred on April 1, 2015.



	Nine Months Ended
	December 31,
	2016		2015
	(Amounts in millions, except per share amounts)
Revenues	$	3,063	$	2,806
Net income attributable to Lions Gate Entertainment Corp. shareholders	$	119	$	134
Basic Net Income Per Common Share attributable to Lions Gate Entertainment Corp. shareholders	$	0.61	$	0.68
Diluted Net Income Per Common Share attributable to Lions Gate Entertainment Corp. shareholders	$	0.60	$	0.63

The unaudited pro forma condensed consolidated statement of operations information does not include adjustments for any operating efficiencies or cost savings, and exclude $61 million of acquisition-related and restructuring costs that were expensed in restructuring and other expenses during the nine months ended December 31, 2016.

Pilgrim Media Group

Business Acquisition [Line Items]

Pro Forma Statement of Operations Information

The statement of operations information below includes the statement of income of Pilgrim Media Group for the nine months ended September 30, 2015 combined with the Company's statement of operations for the nine months ended December 31, 2015.



	Nine Months Ended
	December 31,
	2015
	(Amounts in millions, except per share amounts)
Revenues	$	1,662
Net income attributable to Lions Gate Entertainment Corp. shareholders	$	46
Basic Net Income Per Common Share attributable to Lions Gate Entertainment Corp. shareholders	$	0.31
Diluted Net Income Per Common Share attributable to Lions Gate Entertainment Corp. shareholders	$	0.30

The unaudited pro forma condensed consolidated statement of operations information does not include adjustments for any restructuring activities, operating efficiencies or cost savings, and exclude certain one-time transactional costs of $8 million attributable to the noncontrolling shareholder expensed in connection with the transaction, as well as $3 million of acquisition-related costs that were expensed in restructuring and other expenses during the year ended March 31, 2016.