Alibaba Group Holding Ltd Seeks Massive Lions Gate Stake

Alibaba Group Holding Ltd Seeks Massive Lions Gate Stake
By Charliepug (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Alibaba Group Holding Ltd (NYSE:BABA) is said to be angling for a stake of up to 37.4% in Lions Gate Entertainment Corp. (USA) (NYSE:LGF). Currently Lions Gate Chairman Mark Rachesky holds that stake, which is worth $1.6 billion.

Rachesky to exit Lions Gate

Now the New York Post reports that Rachesky is planning to exit the entertainment company and Alibaba may be interested in moving in. Rachesky is Lions Gate’s single biggest shareholder. His firm MHR Fund Management started buying up the Lions Gate stake in 2005, so he would see big-time profits by selling his stake. In 2010, the firm acquired 16.2 million more shares through a convertible debenture that was conducted to avert Carl Icahn’s hostile bid at the time.

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Asian bankers reportedly told Hollywood investors that it will be revealed next month or possibly sooner that Rachesky is selling his stake in Lions Gate. His exit comes as Alibaba Group is looking for ways to spend part of the $25 billion it raked in on its record-setting initial public offering.

Alibaba CEO to seek entertainment stakes

Alibaba CEO Jack Ma is reportedly seeking to get into entertainment companies, especially U.S. TV shows and film. The company apparently wants to take these shows and import them into China, which is the second biggest theatrical market in the world.

In July Alibaba was already looking to bring U.S. content into China, as it made a deal to stream content from Lions Gate in China. The deal included the Twilight films and Mad Men. If Alibaba takes a stake in Lions Gate, it would ratchet up the two companies’ partnership even further.

Deal between Alibaba and Lions Gate would be huge

Former studio executive Brian Mulligan told the New York Post that a deal between Alibaba and Lions Gate could be a “tide-turning development” for several reasons. For example, he said piracy is usually a problem in developing countries until content companies tire of it and push the government to tamp down on it.

He thinks cross-ownership would especially benefit from this deal. In addition, he notes that China does not have the same restrictions on foreign ownership for entertainment companies.

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