Starz meets with 21st Century Fox about possible acquisition

Executives with Rupert Murdoch’s 21st Century Fox and Starz met Tuesday to discuss a possible acquisition of the premium cable movie service, a deal that could expand Murdoch’s reach into homes across the country.

Starz Chief Executive Chris Albrecht and investment bankers held the discussion with Fox executives at the company’s studio lot in Los Angeles, according to three people familiar with the meeting who asked not to be identified because they were not authorized to discuss the matter.

There is no deal yet, and none may materialize, these people said. A full acquisition of the company could be valued at more than $3.2 billion based on its share price of $29.58 Tuesday. Fox could also decide to take an ownership stake instead of buying Starz outright. Another company might instead make a deal for Starz.

Starz said in a statement that “as a public company, we do not comment on rumors or speculation.”

A person familiar with the matter said that Fox took the meeting with Starz as a courtesy.

Tuesday’s meeting came nearly two months after Fox abandoned its surprise summer bid for rival Time Warner.

That proposed $80-billion takeover was widely viewed as a way for Murdoch to add muscle to his media company with more valuable TV channels — particularly premium pay networks HBO and Cinemax — to better compete in a rapidly consolidating entertainment industry.

If Fox decides to make a play for Starz, the move would underscore Murdoch’s big appetite for more distribution channels. Starz also includes the Encore movie channel. Together the two channels boast 56 million subscribers, more than Time Warner’s HBO and Cinemax. It also eclipses CBS’ Showtime networks.

Liberty Media Corp. in January 2013 spun off Starz and Encore into a separate publicly traded company. The spinoff, orchestrated by Liberty Chairman John Malone, was intended to streamline his company’s businesses — and make Starz and Encore easily digestible for a big media or technology company that might want to swallow it.

Since then, Starz has more than doubled its market value. The company is headquartered in Englewood, Colo., but has offices in Beverly Hills, where Albrecht is based.

Starz’s revenue this year should reach nearly $1.4 billion, according to consulting firm SNL Kagan. Nearly all of its revenue comes from affiliate fees paid by pay-TV providers, including Time Warner Cable, Comcast Corp., DirecTV and Cox Communications.

Starz in recent years has been trying to establish itself with original programming. In early 2010, the company brought in Albrecht to run Starz and revitalize the brand. The goal was to establish Starz as a destination for Hollywood producers and writers, much the way that Albrecht did when he ran HBO and helped launch “The Sopranos,” “Sex and the City,” “Six Feet Under” and “Curb Your Enthusiasm.”

Starz has started to gain traction with its original programming. It scored early with “Spartacus” and more recently with “Outlander,” which is based on the popular fiction series by Diana Gabaldon about a World War II nurse who goes back in time to the 18^th Century.

Starz also is launching a half-hour comedy executive produced by LeBron James called “Survivor’s Remorse,” set in the world of professional basketball.

The company has high hopes for the second season of its pirate adventure project, “Black Sails,” which launches in January. It centers on the tales of Captain Flint and his men two decades before the events in “Treasure Island,” the Robert Louis Stevenson classic.

“I do feel, in 2014, we’ve really accomplished an important goal, which is having a year-round presence in originals,” Albrecht said this month at a Goldman Sachs investor conference in New York. “And what that’s allowing us to do is lead into 2015 with a very strong slate of returning originals and a real plan.”

Starz will spend about $670 million on programming this year, according to SNL Kagan.

The company still faces challenges filling its schedule.

One of its major movie studio suppliers, the Walt Disney Co., recently made a deal with Netflix instead of extending its partnership with Starz. That means Starz will lose its supply of fresh Disney movies by early 2017, but will have more money to spend on original programming.

Sony Pictures Entertainment extended its movie deal with Starz in an agreement that runs to 2021.

Meanwhile, Murdoch’s company two years ago extended its deal to supply movies to HBO until about 2022. This could make it difficult for Fox to run its films on Starz and Encore for many years.

When Starz became a publicly traded company it carried about $1.5 billion in debt. Liberty Media received a cash dividend as part of the split.

Fox will have no problem coming up with the cash for such a deal. After abandoning the Time Warner bid, executives told investors that its stockpile of cash is big enough to make other major acquisitions — though they pledged to not go on a shopping spree.

meg.james@latimes.com