Looks Like Lionsgate Won't Be Acquiring STX After All

The game of chess that is the movie business just moved some pieces around the board, with one merger off the table and another one now having a clear path to completion. As we previously reported, Lionsgate, the studio behind "John Wick" and "Knives Out," had been looking to acquire indie studio STX Entertainment, of "Hustlers" and "Bad Moms" fame. They swooped in after The Najafi Companies, a private investment firm, announced a deal to acquire the studio back in December. Now, it has been confirmed that Lionsgate's offer has been rejected.

According to The Wrap, Lionsgate recently submitted what is described as its "best and final offer" for STX, which didn't come anywhere near the $173 million that was offered by Najafi. As such, STX rejected the offer, paving the way for Najafi to close its deal. The original deal did allow a 45-day window for STX to field other potential offers and Lionsgate did its best to bolster its position in the increasingly difficult media landscape that is dominated by streaming and mega-corporations with deep pockets. Instead, a private equity firm will acquire STX, its library, and resources, to do with it what they please. Lionsgate perhaps made more sense on paper and might have been more exciting, but money talks — and STX really needs money.

STX has suffered some pretty bad flops in recent years such as "UglyDolls" and "Playmobil: The Movie." The business, overall, has not been kind to the company as they are $150 million in debt. Hence, the need for this merger. Either that or they will need to find a way to raise that money somewhere else, and even if they do, they would need to come up with a game plan to get back on their feet. A big buyout from a hungry company seemed like the best option.

There are now a few questions left dangling. For one, Lionsgate is quickly becoming a bit of an outlier in the Hollywood landscape. The bigger studios are only getting bigger, and even Paramount pretty much confirmed it's for sale recently, or at least open to the idea of a big acquisition (we're looking at you, Apple or Amazon). Lionsgate is what is known as a "mini-major" meaning they aren't on the level as say Warner Bros. but they're certainly bigger than STX or A24.

Lionsgate has often been touted as a target to be acquired by a hungry, larger company looking to bolster its media offerings. Yet, the STX announcement made it seem like the studio perhaps had other plans. Lionsgate excels at mid-budget programming and they could have bolstered that part of their business in acquiring the indie studio. I have argued that Lionsgate should almost exclusively focus on mid-budget movies as there are probably going to be a lot of opportunities for those movies to win out at the box office as we emerge from the pandemic.

So, was Lionsgate looking to acquire STX to strengthen its position as an independent entity? Or was the company looking to become better and stronger to any potential suitors looking to make a big purchase? That's the million-dollar question left dangling. The other big question here is what Najafi intends to do. Will they look to make some sort of deal with a media company? Will they try to improve STX's business model and get in that game? Much remains to be seen but the game of media merger bingo continues.