If billionaire media mogul John Malone wants to engineer a massive consolidation of his various television, film and cable TV companies, he's certainly laying the groundwork.
Discovery Communications (DISCA - Get Report) and Liberty Global (LBTYA , Europe's largest cable TV operator, which both count Malone as a major shareholder, announced a deal on Monday to purchase stakes in Lions Gate Entertainment (LGF , the film and television production house best known recently for the Hunger Games and Divergent franchises.
By establishing inter-locking ownership between the companies, Malone appears to be preparing for a series of mergers and partnerships cutting across industries and continents.
"Malone has made his pan-European presence in cable, he's about to do it in the U.S., and now he needs to do something in media content," said Amy Yong, a media analyst at Macquarie. "This is always how he starts."
The picture of Malone's grand plan could become much clearer if and when government regulators approve Charter Communications' (CHTR - Get Report) acquisition of Time Warner Cable (TWC in a transaction valued at $78.7 billion including debt. A ruling is expected in the coming weeks.
Shares of Lions Gate were rising 3.5% to $39.60 while Discovery was gaining 2.2% to $29.63. Liberty Global was adding 0.5% to $45.87.
The Lions Gate stock sale is likely to heighten speculation that Malone is looking for the best and -- given his long history in the business -- the most tax-free means of combining his various media properties.
As part of the equity sale, both companies signed separate licensing deals with Lions Gate for television and theatrical releases. Discovery and Liberty Global will acquire 5 million shares each of Lions Gate from MHR Fund Management, the investment vehicle controlled by the company's chairman Mark H. Rachesky, for about $195 million, giving them each a stake of 3.4%.
Liberty Global, which also owns cable TV networks in Latin America, will place its CEO Mike Fries on Lions Gate's board, which will also be joined by Discovery CEO David Zaslav. Typical of Malone's emphasis on partnerships between this holdings, Liberty Global and Discovery have a joint venture in All3Media, a television production company which they acquired last year for $930 million.
This latest transaction comes nine months after Malone engineered a stock swap between Lions Gate and Starz Networks (STRZA , the premium cable TV channel, of which Malone is the largest stakeholder. To lock in that relationship, Lions Gate exchanged 3.43% of its stock for 4.51% of Starz' shares, held by Malone, whose stake in Starz dropped to 6% from 11%. Of critical importance, Malone joined Lions Gate's board.
At the time of the February stock swap, Lions Gate CEO Jon Henry Feltheimer said the transaction with Starz could lead to partnerships with other Malone holdings around the world. "They said back in February that there are other relationships within Malone's universe that they could leverage," Yong said. "It's looking more likely that Lions Gate could become the vehicle to roll-up the free radicals in media."