Lionsgate (LGF.A Quick QuoteLGF.A - Free Report) is implementing strategic initiatives to enhance its Studio Business, which includes Motion Picture and Television Production segments.

Notably, Lionsgate is set to launch Lionsgate Studios, a separate standalone company, by merging Television Studio and Motion Picture Group segments with Screaming Eagle (SCRM Quick QuoteSCRM - Free Report) , a special purpose acquisition company, in a $4.6 billion deal.

Per the terms, Lionsgate will retain 87.3% of its shares in the standalone company, while Screaming Eagle shareholders and investors will own the remaining 12.7%, marking a significant step toward full separation of Lionsgate’s Starz unit. The deal is expected to close in spring 2024.

The publicly traded Lionsgate Studios will entail a diverse portfolio of franchises and a world-class content library with 18,000-plus titles.

The strategic move comes on the back of a strong box office record of its Studio Business, including John Wick: Chapter 4, The Ballad of Songbirds and Snakes and Saw X, among others.

Further, Lionsgate’s acquisition of a majority stake in talent management and production house 3 Arts Entertainment remains instrumental to the latest move.

The acquisition, valued at $300 million to $350 million, expands Lionsgate’s portfolio with an array of TV series and films, including It's Always Sunny, 30 Rock and The Edge of Tomorrow.

We believe that Lionsgate's recent move aims to further strengthen its studio content portfolio and reach a wider audience, bolstering growth.

Lionsgate’s Reorganization to Boost Prospect

Lionsgate is set to receive $350 million in gross proceeds from the deal, which is expected to strengthen its balance sheet and fund strategic initiatives.

As of Sep 30, 2023, Lionsgate's cash and cash equivalents stood at $322.7 million, with net cash flow from operating activities reaching $301.1 million and adjusted free cash flow at $133.4 million.

Notably, Lionsgate reached a definitive agreement with Hasbro to acquire its eOne content platform for $500 million, including $375 million in cash and debt assumption. The acquisition will significantly enhance Lionsgate's content portfolio with eOne’s 6,500-unit library of scripted and unscripted TV shows and movies and expand its presence in Canada and the U.K.

All the above-mentioned strategic endeavors will position the company well to strengthen its footing in the global content streaming market.

Per The Business Research Company, the content streaming market size is expected to reach $271.49 billion by 2028, exhibiting a CAGR of 14% between 2023 and 2028.

Strong prospects in the content streaming market will likely aid Lionsgate in instilling investor optimism in the stock.

Shares of Lionsgate have gained 87.6% on a year-to-date basis, outperforming the industry’s growth of 24.6%.

Moreover, it will allow Lionsgate to invest its monetary resources and time to focus on individual businesses, thus aiding its top line in the near term.

The Zacks Consensus Estimate for third-quarter fiscal 2024 total revenues is pegged at $1.02 billion, indicating year-over-year growth of 2.05%.

Zacks Rank & Stocks to Consider

Currently, Lionsgate carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Hooker Furniture (HOFT Quick QuoteHOFT - Free Report) and Warner Music Group (WMG Quick QuoteWMG - Free Report) . While Hooker Furniture sports a Zacks Rank #1 (Strong Buy) at present, Warner Music Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Hooker Furniture have gained 41.7% in the year-to-date period. HOFT’s long-term earnings growth rate is 14%.

Shares of Warner Music Group have rallied 0.8% in the year-to-date period. WMG’s long-term earnings growth rate is 8.7%.