New twist in Paul Singer battle over Lionsgate

In a battle of moguls, hedgie Paul Singer appears to have cable pioneer John Malone in an uncomfortable spot.

Singer’s Elliott Management owns a $300 million piece of Starz and is fighting the $4.4 billion price Hollywood studio Lionsgate paid for the premium cable channel in December 2016.

Malone’s Liberty Media owned a 32 percent stake in Starz and controlled a 10 percent piece of Lionsgate — and Singer feels the $32.70 a share price paid for the cable channel was well below its true value.

That was why immediately after the deal Singer — in a first for his activist fund — asked a Delaware judge for an independent appraisal of Starz.

Elliott and other Starz shareholders hold a total of $700 million in shares and are hoping to sweeten their profit on the deal by as much as $500 million, according to a person close to the case.

Ordinarily, appraisal fights would quietly wend their way through the courts without much attention.

But now, with the media world consolidating and several players kicking the tires of $7.1 billion Lionsgate, according to reports, Elliott’s lawsuit could prove troublesome.

The prospect of paying out as much as $500 million for Lionsgate could tamp down a sales price, which is something Malone may want to avoid.

Lionsgate shares spiked 9.6 percent over the past two trading days, to $35.42, after reports that CBS and Amazon — and perhaps others — may have interest in acquiring the bulked-up company.

Lionsgate is one of the few digestible media companies left that owns content; it owns “The Hunger Games” franchise, “Rambo IV” and the just-released “The Commuter.”

“There are some troubling facts about [the Starz sales] process,” a source close to the suit said, which may show an effort to limit consideration of other suitors.

If Singer and the other shareholders were to win the appraisal case that has been quietly progressing, they could be entitled to more than a $500 million profit, the source said, on top of 7 percent interest. “That is optimistic but not unreasonable,” one source said.

Now that Lionsgate may be sold or merged, it puts Singer in a potentially good negotiating position.

“It does create a situation that might increase the desire for the defendants to settle,” one person said. There have been settlement talks that stalled.

Malone is currently a Lionsgate director, and he and his Liberty Global own 10.9 percent of the company.

Singer’s firm is known for making not-so-obvious investments that give him leverage to assert rights — like the time he seized an Argentine frigate as payment on an unusual claim Elliott made after the country defaulted on some bonds. Elliott also was aggressive on trying to collect on an investment in Caesars Entertainment.

Depositions are now taking place, and the plaintiffs are likely to soon ask to depose Malone, a source said, with the appraisal trial expected to start this fall.

Meanwhile, a sale of Lionsgate is complicated, a source said. A potential stumbling block is Mark Rachesky, whose hedge fund owns 19 percent of Lionsgate and who has historically held out for outsized profits.

Elliott and Lionsgate declined to comment.