Screaming Eagle Acquisition Corp. (LGFA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Lionsgate Studios Transaction Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Nilay Shah, Head of Investor Relations. Please go ahead.

Good afternoon. The matters discussed on this call include the proposed business combination of our Motion Picture Group and Television Studio segments and our film and television library with Screaming Eagle Acquisition Corp. to launch Lionsgate Studios. We urge you to read the relevant materials that we and Screaming Eagle have and will file with the SEC, including in our Form 8-K filed on December 22, 2023 and a registration statement on Form S-4 to be filed with the SEC that will include a preliminary prospectus or proxy statement. The information and the prospectus or proxy statement will not be complete and may be changed. You can find these materials and other documents filed and to be filed with the SEC free of charge at the SEC's website, www.sec.gov, or on our Investor Relations website. The matters discussed on this call also include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors. This includes the risk factors set forth in Lionsgate's most recent annual report on Form 10-K as amended and our most recent quarterly report on Form 10-Q filed with the SEC and in the Form S-4 to be filed with the SEC. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. Moreover, Lionsgate, its subsidiary, LG Orion Holdings, our directors, executive officers and certain other employees and other persons may be deemed to be participants in the solicitation of proxies from shareholders of Screaming Eagle in favor of the proposed business combination under SEC rules. Information about participants and their direct and indirect interests will be included in the prospectus or proxy statement and on the other relevant documents filed with the SEC as available. No offer to sale or solicitation of an offer to buy securities will be made except pursuant to an effective Form S-4 or an exemption. I'll now turn the call over to Jon.

Thank you, Nilay, and good afternoon, everyone. Thank you for joining us. I hope you had an enjoyable holiday. I want to welcome the analysts and current shareholders who are familiar with our company as well as those investors who may be new to the Lionsgate story. We wrapped up the calendar year with 3 strategic initiatives designed to enhance our studio business: the acquisition of the global content platform eOne adding thousands of titles to our film and television library and strengthening our scripted and unscripted television business; an additional equity investment in leading talent management and production company, 3 Arts Entertainment, as it continues its strong and profitable growth; and our launch of Lionsgate Studios as one of the world's largest publicly traded pure-play stand-alone content companies in a transaction that we expect to close in the spring. I'll begin by framing the opportunity and rationale for the Lionsgate Studios transaction. While you may have seen the investor presentation regarding the transaction on our website, Michael will take you through an updated version of the slides and Jimmy will drill down on the transaction structure itself along with a fiscal '25 financial outlook we provided for Lionsgate Studios. We had a number of options available for executing the step in our overall strategic plan. We believe that we selected the best option for aligning with our goal of a full separation raising capital efficiently with substantial proceeds available to delever and establishing an appropriate valuation for our studio supported by blue chip investors. Several considerations drove the rationale for this transaction. First, the structure basically replicates a subsidiary IPO but with a few distinct advantages. We were able to launch Lionsgate Studios on a tighter and more defined time line and provide certainty by setting a fixed valuation anchoring the $175 million equity commitment. Second, upon completion, this transaction enables us to raise $350 million of total proceeds to accelerate deleveraging and to facilitate strategic initiatives like the eOne acquisition and the increased position in 3 Arts. As today's presentation will show, the combination of a pure-play studio and a strong balance sheet will be a key driver in continuing to grow shareholder value. Third, by separating the studio with a single class of shares, we're executing on an investor priority by isolating the value of one of the only pure-play studios in the market today. We believe this transaction sets a valuation for the studio and increases our strategic optionality as we move toward separation. Finally, the transaction will not limit the studio's ongoing working relationship with STARZ, which remains a wholly owned subsidiary of parent company Lionsgate. STARZ will have the ability to continue strengthening its position as a profitable premium SVOD platform with a domestic content strategy focused on valuable core demos, a largely digital subscriber base and a continued reliable supply of content from the Lionsgate television and motion picture groups. In that regard, I'm pleased to report that STARZ continued its domestic OTT subscriber growth in the quarter. In closing, when Michael and I started running the company more than 20 years ago, we placed a bet on the enduring value of great intellectual property. Today, our content businesses are thriving with more buyers and more options for monetizing our content than ever before. We finished the calendar year with our first $1 billion-plus year at the worldwide box office since 2019, driven by successful new chapters of 3 of our biggest franchises, strong and growing profitability in our television group, and a film and television library that is approaching $900 million in trailing 12-month revenue. The continued strength of our content business underlies the fiscal '25 Lionsgate Studios financial outlook that Jimmy will discuss. But first, I'll turn the presentation over to Michael.

Thanks, Jon. While many of you on this call know the Lionsgate Studio story quite well, I wanted to give a brief overview of why we believe a stand-alone Lionsgate Studios will make a highly attractive equity investment. While you may have seen the full investor presentation that we shared when we announced the transaction, please see the updated January 4 conference call slide deck on the Events portion of our IR website for an updated version of slides that Jimmy and I will be referring to. Let's start with Slide #4. This transaction is about separating the studio and STARZ, which we strongly believe will unlock significant shareholder value by enabling direct investment in the studio with a single class of stock. I'll be discussing a few metrics to demonstrate why Lionsgate Studios is positioned so well in this environment. Jimmy will speak later about the outlook, but clearly, we are seeing strength in our business beyond fiscal year '24 as shown with a double-digit OIBDA growth for Studio in fiscal '25. Library, our growing high margin, perhaps the most important asset of the company, continues to do well. We are selling a minority stake in the studio at 10.7x multiple, which establishes the initial studio value and gets us poised for full separation. We're about content, content and content, specifically premium content in our motion picture and television businesses that ultimately bolsters our library. Let's turn to the next Slide #5, which drill down on our Studio business. Our business is propelled by 3 primary drivers: our motion picture studio, which releases 40 to 50 titles per year, ranging from the recognizable franchise films such as John Wick and Hunger Games to mid-range budget films like Plane to small budget indie films like Sisu. Motion Picture generated $1.6 billion in revenue over the past 12 months. Our television studio, which is producing over 80 series for 50 networks across all major streamers and broadcasters covers the entire gamut with capabilities across scripted, unscripted and syndicated programming. Our television business generated $1.5 billion in revenue over the past 12 months. And our library and distribution group, which distributes over 20,000-plus pieces of content across film and television to all sorts of global buyers, whether SVOD, AVOD, linear, fast or cable channels. Revenue from our library is included in our motion picture and television revenue, and it's important to highlight that our library generated $870 million in revenue over the last 12 months. So what's driving this? Over time, our strategy has evolved, but the key tenets of why we are different can be broken down to 2 primary drivers. We are different because we focus on maximizing monetization of content rather than being beholden to a consumer-driven streaming or television network business. While Lionsgate Studios and will continue to have a very strong relationship with STARZ, our content creation strategy is 100% focused on driving the highest returns on each item of content rather than serving as a funnel for an own streaming or television platform. This ensures we maximize returns on all of our spend while a number of our peers are primarily using their studio business as a conduit to try to prop up their DTC streaming businesses. This goes for our library content as well. We derisked the film business via international licenses. As I'll discuss on the next slide, we have a very high hit rate on making profitable films. This stems from the fact that we only take box office marketing and P&A risk in a few key markets, including the United States, Canada, the U.K. and Latin America. Everywhere else, we license the film's rights to regional or global buyers that take on the distribution marketing spend for that market. Let's take a closer look at our model on Slide 6. Our pure content strategy has led others to call us a benevolent arms dealer, which is a moniker we embrace. As you can see on the next slide, #7, the universe of licensees for our arms a.k.a. content is expanding rapidly. This list shouldn't be surprising. We sell to everyone, Netflix, Amazon, Apple, HBO to name a few. Jon mentioned our positioning with AVOD, SVOD, FAST, broadcast, et cetera. Our size, scope and independence allows us to work with everyone, and we expect that list to grow. If I could give one reason why we can compete and thrive, it would be our library, our crown jewel. Now let's move on to the next slide, #8, which provides an overview of the key pieces of IP that make up our portfolio of motion picture, television and library content. Obviously, some big franchises in here, like the aforementioned Hunger Games and John Wick but also Twilight, Saw, Mad Men, Orange is the New Black and the Power series. We never rest after a hit. We are always looking at new ways to exploit key franchises and keep the fan base engaged in new ways. You may have seen that in the same year, we had a successful John Wick 4 release from our motion picture team. We also released The Continental, a John Wick prequel television series, which was one of Peacock's top originals in 2023. Besides theatrical revenue for these titles, we obviously have sequels, remakes, IP expansion through merchandise, location-based theme parks and symbiotic alliances with companies like Blumhouse in the horror space. Next, on Slide 9, which covers some of Lionsgate's film returns. Besides new content, we have key repeatable franchises with a risk-mitigated model, enabling us to produce compelling financial returns. We produced 10 plus wide releases theatrically a year. And historically, 74% of these titles are profitable, which we believe is well ahead of the industry average. As you can see, we produce and distribute a great number of theatrical films every year. I'd be remiss if I didn't mention the optionality this gives us to capture lightning in a bottle like we did with our biggest franchises over the last few years, Twilight, Hunger Games, Now You See Me and John Wick. Additionally, we have a less understood but highly compelling business we call multi-platform. This is where we buy and distribute 30 to 40 low-budget films while utilizing our scaled theatrical home entertainment and library distribution infrastructure. Since fiscal 2020, 93% of our multi-platform film releases ended up being profitable to Lionsgate Studios with above-average returns. So clearly, we have a movie business model that works well and provides a blend of balance between profitability, growth and risk. The vast majority of these pictures come with worldwide rights in perpetuity. But how do we know that will continue? Let's take a look at Slide 10, which discusses our pipeline. Of course, no studio can rest on their laurels on past successes. We are still going to be judged on our future releases. And on this topic, we really like how the pipeline for our motion picture and television group is shaping up over the next few years. As you'll see, a lot of compelling projects are in the slate. We're very excited about our first John Wick spin-off, Ballerina, later this calendar year. We have already dated the next Saw film. Some other highly anticipated films in the next few years include Now You See Me 3, Highlander and the much anticipated, Michael Jackson biopic just to name a few. Turning to Slide 11. We take a look at the television pipeline, a really strong lineup across streaming, particularly at Apple and STARZ as well as broadcast where the CBS comedy, Ghost, has become a breakout hit and the #1 comedy on the network. The addition of eOne provides 2 big franchises to our TV studio, including The Rookie, which is returning for its sixth season in 2024 on ABC; and Yellowjackets, which is a hit show for Paramount+. You can read more detail about eOne on Slide 17 of the deck filed at the time of our transaction on December 22 last year. eOne is right in our wheelhouse. We paid around 6x adjusted post-synergy OIBDA for a bolt-on acquisition that we will leverage into our existing television production and library distribution infrastructure. Mythic Quest, a co-production with Lionsgate Television is a great example of why we invested in 3 Arts, the best-in-class management company. That takes us to Slide 12. Film television 3 Arts serve as a 3-legged stool, providing an enormous content annuity stream. 3 Arts is one of the industry's premier talent management and production companies. Lionsgate first took a 51% stake in 3 Arts back in 2018, and it turned out to be a terrific investment. Earlier this week, we increased our stake significantly. The relationship between Lionsgate Television and 3 Arts since our 2018 investment has grown stronger over the years with 3 Arts adjusted OIBDA increasing by 2x from fiscal 2019 to fiscal year '23. With the strikes now behind us, we expect 3 Arts to continue to be a strong contributor as we enter fiscal '25 with some of their upcoming coproductions with Lionsgate, including Hunting Wives and Serpent Queen remain perfect examples of the strength of 3 Arts and the studio's relationship. The 3 legs of the stool are supported by our library foundation. Please turn to Slide #13 to dive deeper into our library, which is growing nicely at 12.5% CAGR and approaching $900 million on the top line, very high-margin business and is 1 of the largest independent libraries in the world with over 20,000 titles. Our library has been a consistent grower over the past several years, even growing through the pandemic when Lionsgate Studio wasn't releasing much new content. Continuing on Slide 14. We think library has become more and more valuable to streamers over time, especially in a world where content spend on originals is being reassessed. The Suits phenomenon has proven to the market where we've always internally believed at Lionsgate, that deep, high-quality library content can have superior unit economics to streamers compared to expensive originals. We are already seeing this trend positively affecting our library business. People always focus on the strategic value of library, but the reality is its financial importance as the anchor to funding a great deal of our new content spend can't be overstated. We've talked about organic growth, but we've had a solid M&A history as well over the last 20-plus years. Slide 15 overviews a quick history of successful M&A deals we've done related to the studio. Most of the deals were bolt-ons, but some like Summit were transformative. A great number were actually paid for with the acquisition's own money. And that segues us into Slide 16, which discusses our eOne asset, which we recently closed on last week. You will hear eOne mentioned a bunch of times on this call, and that's because the opportunity fit exactly into what we do so well, acquiring a solid foundation of hit television series combined with a top-notch reality television business. And of course, the library of 6,500-plus titles is great, but more importantly, we get to integrate the assets into our existing content creation and library distribution apparatus. So when all is said and done, we'll end up paying around 6x adjusted OIBDA for the business, which we find extremely attractive, especially when considering where our studio is being valued in this public offering. With this library and recent pickups on shows like Yellowjackets, The Rookie and The Spencer Sisters, this deal should deliver steady revenue growth and OIBDA. We thrive on M&A plus organic growth. Before I hand it off to Jimmy, I wanted to just summarize again why we think Lionsgate Studios is uniquely positioned to create significant shareholder value over the next few years. Let's turn to Slide 17, please. Our 5 core tenets each are immense assets individually and worth a lot more together. The guiding principle and bedrock of the studio is to create high-quality content that can be added to our library for long-term monetization. It's the gift that keeps on giving. While consumer taste continue to shift, what hasn't changed is consumer demand for quality commercial content, and our track record as a key supplier of content to all of the major players regardless of platform creates tailwinds for our business long term. This transaction, which we believe will set a mark for the valuation of Lionsgate Studios also creates a path towards full separation, which Jon discussed in his opening remarks. By staying independent and being agnostic to whom we license our content, we believe Lionsgate has substantial growth opportunities. And now by establishing an opportunity for investors to participate in our pure-play studio equity, we believe Lionsgate's best days remain ahead. Jimmy will now take you through the transaction details, summary financials and outlook. Jimmy?

Thanks, Michael, and good afternoon, everyone. Let's start with Slides 19 and 20, which provides a simplified transaction structure overview and key transaction terms. As Jon noted, we are excited to announce the combination of Lionsgate Studios, which consist of our Motion Picture, Television Production and library distribution businesses with Screaming Eagle Acquisition Corp. at a pre-money enterprise value of $4.6 billion as summarized on Slide 19. Lionsgate Studios will raise $350 million of gross proceeds, including $175 million from marquee pipe investors with the remainder from cash held in Screaming Eagle. We will use the transaction proceeds to delever. After taking into account this capital raise, our recently closed eOne acquisition and the incremental stake in 3 Arts that we recently purchased, Lionsgate Studio's pro forma allocated net corporate debt is anticipated to be approximately $1.4 billion at the close of the transaction. In exchange for contributing its studio assets into Lionsgate Studios, Lions Gate Entertainment Corp., which I'll refer to as Lionsgate parent, will own approximately 87% of Lionsgate Studios, while the remainder of Lionsgate Studios will be owned by pipe and Screaming Eagle investors. Along with its 87% stake in Lionsgate Studios, Lionsgate parent will also own 100% of STARZ. When referring to the pro forma ownership section of Slide 20, please note that this section is describing the Lionsgate Studio's pro forma cap structure at the announced Screaming Eagle transaction price of $10.70 a share. As you will see under key terms on Slide 20, we have structured this transaction with minimal founder shares. More specifically, unlike other SPACs in the marketplace that include significant amounts of dilution, Screaming Eagle founders have relinquished the vast majority or 14.5 million of their 18.7 million shares. Of the 4.2 million remaining founder shares, 2.2 million will be subject to an earn-out and will only vest upon Lionsgate Studio stock increasing by 50% to $16.05 per share. Thus, at close, the Screaming Eagle founders will own less than 1% of Lionsgate Studio shares. Additionally, the founders have forfeited all of the private warrants they previously would have received as part of the transaction. Finally, all public warrants will have been repurchased by the company by the time the transaction closes. Let's move to Slide 21 for the key components of our financial outlook. First, with respect to fiscal '24, we are reiterating all prior components of our fiscal '24 outlook for both segment-related profit as well as consolidated adjusted OIBDA. As you will see on Slide 21, we referenced a $320 million stand-alone studio adjusted OIBDA outlook for fiscal '24, which is comfortably within our previously stated range of $300 million to $350 million. Now looking at fiscal year 2025, we are providing adjusted OIBDA outlook for Lionsgate Studios of $370 million, which excludes the impact of eOne. This implies over 15% year-over-year growth versus the $320 million we outlined in the presentation slides. Additionally, you will see in our presentation that we anticipate that eOne will achieve an annual run rate adjusted OIBDA contribution in fiscal year 2025 of $60 million. Including this run rate contribution from eOne, the $4.6 billion announced pre-money enterprise value for Lionsgate Studios implies a 10.7x fiscal 2025 adjusted OIBDA transaction multiple. Before I close, I want to discuss the net debt allocations as laid out on Slide 22. As noted earlier, 1 of the benefits of this transaction is that it results in over $300 million of deleveraging without impacting our existing corporate debt structure, including the availability of our $1.25 billion revolving credit facility. Slide 22 provides a bridge to better understand how Lionsgate's consolidated net debt of approximately $1.7 billion as of September 30, 2023, will progress by the time the transaction closes. Specifically, inclusive of our recent purchase of eOne, the incremental stake we took in 3 Arts and the use of cash related to the timing of post-strike content spend, Lionsgate's consolidated net debt at March 31, 2024, before the net proceeds of $317 million from the announced transaction is estimated to be approximately $2.4 billion. The net debt after proceeds will approximate $2.1 billion with $1.4 billion allocated to Lionsgate Studios being an intercompany debt agreement, while the remaining $700 million of net debt is expected to be allocated to our STARZ business. Inclusive of the $60 million run rate of eOne adjusted OIBDA, this implies net leverage of 3.3x our estimated studio adjusted OIBDA for fiscal '25. To wrap up, we anticipate the transaction closing in the spring of 2024. There will be customary regulatory reviews of the transaction with the SEC and Canadian authorities, but the proposed transaction does not require a shareholder vote among Lionsgate shareholders. Finally, as Jon noted in his prepared remarks, we remain committed to a full separation of Lionsgate Studios and Starz. Now I'd like to turn the call over to Nilay for Q&A.

Thanks, Jimmy. Operator, can we open up the line for questions, please?

[Operator Instructions] The first question is from Steven Cahall with Wells Fargo.

Jon, you said you had a number of options here, and December was the best. So maybe for Jon and Michael, you're marketing the Studios here at about 11x [ EV to ] EBITDA. Your post-money net leverage, as Jimmy said, is 3x. How did you think about balancing the available transactions in terms of any appetite for a higher valuation or a bigger capital raise versus the time to close or the attractiveness of the time to close presented by the SPAC? So that's the first one. And then second, Michael, how do we think about the process for collapsing the As and Bs? And specifically, can you talk about what percentage of As or Bs will need to vote for that to approve any exchange ratio? And I've got a quick follow-up for Jimmy.

Yes. Thanks, Steven. I'd say that we found a price that we thought was reasonable for raising equity but doesn't really ultimately, of course, represent the full value of how we consider the studio. But we're always happy when investors old and new come in and can make some money with this. And I think the process proved to us that it was a fair price that worked for both sides.

And I'll take the collapsing the stock. Ultimately, when you come up with a ratio for the As and the Bs, Steven, you're going to have to need -- get a shareholder vote for both the As and the Bs, and my sense is that will be imminent but closer to separation.

And then just for Jimmy on the debt, as we think about where you were at the end of the last quarter and where you're going to be pro forma for the deal, we've got 3 Arts in there. eOne is in there. It looks like there's been a couple of hundred million of additional net debt if I bridge it. Is that increasing cash content spend? Or anything in cash flow performance that you can speak to in terms of that pro forma outlook for the debt?

Yes, Steven. I mean, that's our current forecast, and there is a bit of timing there. You saw, as you noted, we had really strong first half free cash flow delivery. Some of that was timing. It was pre-strike or during the strike. And as we ramp up -- as we noted on our last earnings call, we're ramping up production quickly as we emerge from the strike. So there would be anticipated more content spend in the second half of the year.

The next question is from Barton Crockett with Rosenblatt.

You guys made the point with the announcement for the holidays, I guess, that the implied kind of equity value for STARZ is negative in this deal. And that just makes me kind of think -- ask questions about the split in terms of this, which is do you still think, given where the market is kind of valuating STARZ, it makes sense to split? Or does that kind of elevate, in your minds, maybe that there should be some other options for STARZ? Aside from split, this should be more prominent in the thinking about this point.

Yes. Thanks for the question, Barton. I think the great thing about this transaction is we retain full optionality to treat STARZ differently. Yes, clearly, we think STARZ is way more valuable than we're given a value for in the stock. It's doing, what, $1.4 billion of revenue. around $200 million of North American EBITDA. It's cash flow positive. Obviously, we're benefiting from the fact that we're cleaning up the international channels. That'll be done -- the last one in the U.K., that will be done in the next couple of months. So look, we believe that will be a great stand-alone channel. It will probably bulk up if we were to separate the business. Could we sell it as well? Again, we retain full optionality. So one way or the other, someone is going to take advantage of the value that they've created at STARZ.

And then if I could just ask one other question. Could you walk through what is kind of the drivers of the growth in studio EBITDA from '25 versus '24? What's kind of driving your outlook there?

No, sure. Thanks, Barton. Yes, look, we're coming off of fiscal '24 that we actually navigated very well, particularly through the strikes. And while there's some carryover impact, we really feel good we're bouncing into '24 with strength in TV. 3 Arts in particular, right, coming off of a strike impacted period will be strong. Television Production, expect post-strike episodic deliveries, both new and returning series. We have Ghost Season 3 coming out. We have things like Mad Men rotating back into our licensing cycle. And on the Motion Picture side, we've got a very strong theatrical slate, Ballerina, Saw 11, Borderlands, The Crow. And then we have a carryover -- nice carryover into home video in EST with respect to Hunger games. So really feel good about how we're projecting into fiscal '25.

The next question is from David Joyce with Seaport Research Partners.

A couple of questions. First is structural. The other is operational. Structurally, how should we think about the timing for a full separation given that this -- the deal with Screaming Eagle will be completed in spring? And then secondly, kind of extending the prior question on growth. what would be the broad strategy from here? Every piece of content generates cash over a long period of time, but it diminishes, so you have to keep layering on more assets. But what are some other strategies to try to drive annuity revenue stream? Anything else you can do with the IP such as more attractions at theme parks and that sort of thing? Just wondering what some of the growth strategies could be.

Yes. I'm not sure I understood what you're saying was you acquire businesses, obviously, that fuels growth, particularly when we can do what we're doing with eOne, which is effectively buy something at a multiple probably half of our current multiple and even less than that in what we think ultimately our multiple is. So I'm not quite sure we can go back to that on the full separation. I think we are targeting calendar '24. In terms of growth, you mentioned ancillary businesses. We have really started ramping up those businesses. I could say a lot of them, whether it's theme parks, whether it's our video game business, I announced a new John Wick AAA game recently, those businesses do take time. There's lots of smaller pieces that add up. We've got 12 Broadway shows in development, a couple coming to fruition pretty quickly. So I definitely see, in the next year or 2, those businesses contributing far more heavily to the business, but our core businesses are growing. And I think that's the point Jimmy was making. Our library keeps growing. Our television keeps growing. 3 Arts is killing it. They doubled their EBITDA in the last 5 years that we've had them working together. We've got a really diversified set of assets. Our Debmar-Mercury business is working well. I would actually say all of our businesses are working well. And when we can buy some of these, call it, free radicals, as John Malone would say, and we can have them be extremely accretive, that continues to grow our business and take advantage and leverage our infrastructure, which is, frankly, world class.

The next question is from Thomas Yeh with Morgan Stanley.

Yes. Just in light of the recent eOne closure, can we get some color on what the integration process over the next year will look like? And maybe are there any structural reasons why the eOne margin profile can't reach your existing TV segment over time? Maybe lay out hitting the run rate as you like talked about for exiting fiscal '25, what that looks like over the course of the year. Would be helpful.

No, Thomas, thanks. We feel good about achieving that pro forma run rate, right, post synergies as we put in here $60 million, meeting that, achieving it or exceeding it. And the cadence of that will come over the year as we go into integration, it's still early now, right? We're just consummated just a few weeks ago, the transaction itself, and we're off to a very strong integration, expect revenue synergies, obviously, some benefits on the cost side as well and feel good about achieving that. And it just fits like a glove with our business, particularly on the TV side and the library folding in. So more good things to come.

Yes. I would say operationally, while we couldn't operate that business, while we're in final approval process, I would tell you, I think our staff has done an amazing job of being prepared for it. I think you'll see an announcement soon on how we're approaching our nonfiction television business and that integration of that business. I personally am going up to Canada next Monday to meet everybody that I haven't met yet, and we're going with the whole team up there. But we're well along in the integration process and have seen no surprises, except good ones so far.

Great. That's good to hear. And just on top of that, in terms of the long-term margin potential of that business, is there an asset mix that structurally would make it look different than what you currently operate with? Or should I think about the opportunity being pretty good for you to be able to bring that back to your historical track record of being able to deliver pretty healthy margins on the TV side?

Yes, I think that's right. I think that's the right way to look at it. We're getting both on the scripted side and the, I would say, unscripted. There should be really nice accretion. As we fold them together, again, you'll see that announcement. There are some benefits, I would say, we probably expected, but there will be some benefits from the way they are positioned in Canada. I think we are getting benefits, particularly as we continue to expand our television business into some lower budgeted international production. We've done quite a few of them this last year. So I think you'll see some accretive benefits there. But yes, I think, overall, it will look pretty much like our television business.

Yes. And Thomas, integrating the library and our library and titles in these additional territories has a significant benefit. Jim Packer and team are just beside themselves waiting to get work with the eOne team to execute.

Okay. Super helpful. Maybe I could squeeze one last one in just in terms of following up on the commitment towards the full separation. Should we think about the original mechanics in terms of the plan to spin Studio out from STARZ, that still holds? Or is there any more complexity to contemplate given kind of the public equity that would be out there for Studio?

No, that still holds. This lines up nicely with our overall plans. Once again, it allowed us an opportunity to delever, which is something we always wanted to do as part of the full separation, so -- but otherwise, you see we retained over 80%, so we can execute a tax-free shareholder spend of the Studio.

The next question is from Alan Gould with Loop Capital.

I've got 3 here. First on eOne. Can you tell us what the run rate revenue is on eOne and how much cost or revenue synergies are part of that $60 million? Secondly, an easy one, Jimmy, this is SPAC. So will the S-4 present more detailed management projections or longer further out than what you've provided today? And third, on a structural question, until you actually have the split, who votes the 87% of the studio shares that will be owned by the Lions Gate Corporation, the shareholders or committee of the Board? How does that work?

Yes. From an operational perspective, unless there is a change of control transaction to the Board. Jimmy?

Yes, with regards to eOne revenue, probably something like $600 million run rate on the revenue but I think more importantly, just looking at ultimately what that contribution is. So a lot of that will be impacted by timing of episodic deliveries, of course, on the TV side. We'll fold the motion picture business really into our business. We're already handling a release in common there, Arthur the King, that's coming out. So -- and then we'll integrate the library, as I noted earlier. On the S-4, the projections you'll see will be in line with obviously but no more robust, I wouldn't expect, than what we've already provided in the road show deck and discussed today in my remarks.

The next question is from Matthew Harrigan with Benchmark.

Very elegant [ animal ] on a very long messy plot, so congratulations. I was going to ask about the tax considerations on STARZ, but since that was already asked, if you look at the issues at the box office the last couple of years, you've clearly been positioned as a winner. And as Michael said, you're kind of benign arms dealer on the streaming side. But how do you position your business that the theatrical box office continues to decline on a global basis? And do you think some of your competitors who are maybe too streaming oriented will kind of reassess the balancing and the positioning that they've done? Because I mean, you're clearly a winner right now. But what happens if the process continues the way it's been in the last few years?

Yes. I'll tell you, I think to start with your premise is a little bit off because you can't talk about the film business as a box office business. Okay? The box office is the driver of the business, but I think -- I can't speak for all of the studios, but I think if you ask folks overall how they think about the business right now, I'm hearing, really, when people start putting together all of the revenue streams, I think, pretty positive businesses. And so in terms of our segment 1 business, that's our wide release business. We do, do it a little differently as you well know, Matthew. And I think I like our profile. We probably take a little away from the super upside. But the way we pre-license our movies to, frankly, a much larger group of international buyers and therefore, go into the domestic release with a far lower gap or deficit, I think, to start with that in the world that we're in right now, it's a great model. And I would say again that when you look at the entire value chain for segment 1 movies, I would say, particularly because we've all -- everyone's experimenting, but everyone is doing earlier windows in terms of pay-per-view EST, pay television, et cetera, and again, obviously, an earlier window just is more economic than a revenue stream that comes in way later. So I guess, at the end of the day, the calculus as far as I'm concerned for what we call segment 1 movies, wide release movies, is every bit as good even if the overall box office is a little bit less. In terms of what we call segment 2, our lower budgeted movies, our multi-platform movies, our direct-to-streamer movies, as I think we've said on some calls before, we're at about 94% success rate. I would say our IRR in those is 30% to 40%. And that's a business that is getting stronger and stronger, 30 movies, 40 movies a year. It's a great foundation, a great bedrock for our overall business. So I guess maybe I'm Chicken Little a little bit, but honestly, I like the business a lot. It's a driver for library and repackaging our library. I think it's a great business. Not really concerned about it. I'm bullish on it.

The next question is from Jim Goss with Barrington Research.

I had a couple of questions. One, I was -- you were detailing your mix in terms of films versus television versus library as being fairly balanced. And I'm wondering if your ultimate mix objectives are to maintain that balance or tilt toward one area or another based on how you think the business is going. And with M&A, are you tending to think of your growth more in terms of accretive M&A versus organic? And then finally, premium preference is sort of prominent these days. And I'm wondering if that causes you to filter film production ambitions more towards bigger budgets with perceived blockbuster potential. And that's it.

Yes. I'll start with the last and kind of work up. I would say I've kind of answered it, I think, but we like the mix of product that we have. And I would say at the end of the day, we don't concentrate on being in the blockbuster business. I would say, for example, we have Highlander, coming down the pipe. Chad Stahelski is directing it. I've got very high hopes for that as a franchise. But I promise you we won't be spending $250 million or $300 million on the first movie or, frankly, on any of the movies. But I would consider that for us a blockbuster. As we develop that, we're developing -- at the same time, we're developing a whole set of characters and spin-offs and television around it. So that to me is a blockbuster. But it's not going to have crazy risk to it. And again, we will presell, I pretty much guarantee, 70%, 80% of the cost of that movie. And so we're going to stick with that model. In terms of M&A, I would say -- versus organic growth, I mean, you always want to have as much organic growth as you can. But because we've built this incredible infrastructure and frankly, I can handle -- I can even handle with that infrastructure, a significant amount of additional library product. I would say M&A is always a faster way to growth, but you can't ever forget organic growth and especially the creation of intellectual property, great intellectual property. That's something we have to concentrate on all of the time. And then I'm sorry, your question about mix of product, I would say that's not -- yes. We don't -- I mean, it's not something you really aim at. If you ask me what would I really like to see, I'd like to see the biggest revenue generator be the library. Obviously, that would be the best. But that's probably not going to happen just because again, if you look at the mix right now, you've got film, television and STARZ even generating, I'd say, sort of more current revenue. But at the end of the day, obviously, the key thing for us is building up that library. So the higher that goes, the better I feel.

The library, as you know, Jim, just naturally grows as products flow through in the production. I mean as Michael noted, we're putting like 450 titles a year in the library just through TV and Motion Picture. And of course, the eOne will nicely supplement our TV business.

This concludes our question-and-answer session. I would like to turn the conference back over to Nilay Shah for any closing remarks.

Thanks, everyone. Please refer to the Press Releases and Events tab under the Investor Relations section of the company's website for discussion of certain non-GAAP forward-looking measures discussed on this call today. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.