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As filed with the Securities and Exchange Commission on April 22, 2024

Registration No. 333-     

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

 

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

SEAC II Corp.*

(Exact name of registrant as specified in its charter)

 

 

 

Cayman Islands*   7812   N/A
(State or other jurisdiction of incorporation or organization)   (Primary Standard Industrial Classification Code Number)   (I.R.S. Employer
Identification No.)

955 Fifth Avenue

New York, NY 10075

(310) 209-7280

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Eli Baker

President and Chief Financial Officer

Screaming Eagle Acquisition Corp.

955 Fifth Avenue

New York, NY 10075

Telephone: (310) 209-7280

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Joel L. Rubinstein

Jonathan P. Rochwarger

White & Case LLP

1221 Avenue of the Americas

New York, NY 10020

(212) 819-8200

 

David Coll-Black

Goodmans LLP

333 Bay Street

Toronto, Canada, ON M5H 2S7

  David E. Shapiro
Wachtell, Lipton,
Rosen & Katz
51 West 52nd Street
New York, New York 10019 (212) 403-1000
  Kimberly Burns
Bennett Wong
Dentons Canada LLP
250 Howe Street, 20th Floor Vancouver, British Columbia Canada, V6C 3R8

 

 

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:  ☒

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

*

Prior to the consummation of the Business Combination described herein, the Registrant intends to effect a deregistration pursuant to and in accordance with Sections 206 through 209 of the Cayman Islands Companies Act (as revised) and a continuation and domestication as a British Columbia company in accordance with the Business Corporations Act (British Columbia), pursuant to which the Registrant’s jurisdiction of incorporation will be changed from the Cayman Islands to British Columbia, Canada. In connection with the Business Combination, the Registrant intends to change its name to Lionsgate Studios Corp.

 

 

The registrant (the “Registrant”) hereby amends this registration statement (the “Registration Statement”) on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 


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EXPLANATORY NOTE

This registration statement registers the resale of up to 25,110,168 common shares (the “Offering Shares”), without par value, of SEAC II Corp., a Cayman Islands exempted company, by the Selling Shareholders named in this prospectus (or their permitted transferees) (the “Selling Shareholders”). The Selling Shareholders are expected to be issued the PIPE Shares (as defined below) in private placements immediately after the Amalgamations (as defined below) in connection with the proposed business combination and immediately prior to the consummation of the Business Combination by and among Screaming Eagle Acquisition Corp. (“SEAC”), SEAC II Corp., a Cayman Islands exempted company and a wholly-owned subsidiary of SEAC (“New SEAC” or “Pubco” following the consummation of the Business Combination), Lions Gate Entertainment Corp., a British Columbia company (“Lions Gate Parent” or “Lionsgate”), LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of Lions Gate Parent (“Studio HoldCo”), LG Orion Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of Lions Gate Parent (“StudioCo”), SEAC MergerCo, a Cayman Islands exempted company and a direct, wholly-owned subsidiary of New SEAC (“MergerCo”), and 1455941 B.C. Unlimited Liability Company, a British Columbia unlimited liability company and a direct, wholly-owned subsidiary of SEAC (“New BC Sub”).

The Offering Shares will not be issued and outstanding at the time of the extraordinary general meetings (the “SEAC Meetings”) of SEAC’s shareholders and public warrantholders relating to the Business Combination. Further, the holders of the Offering Shares will not receive any proceeds from the trust account established in connection with SEAC’s initial public offering in the event SEAC does not consummate an initial business combination by the June 15, 2024 deadline set forth in its amended and restated memorandum and articles of association, as amended (the “SEAC Articles”). In the event the Business Combination is not approved by SEAC Shareholders or the other conditions precedent to the consummation of the Business Combination are not met or waived, the PIPE Shares will not be issued and New SEAC will seek to withdraw the registration statement prior to its effectiveness.


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and does not constitute the solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED APRIL 22, 2024

PRELIMINARY PROSPECTUS

SEAC II CORP.

25,110,168 Common Shares

This prospectus relates to the resale from time to time by the Selling Shareholders named in this prospectus or their permitted transferees (collectively, the “Selling Shareholders”) of up to 25,110,168 common shares (the “Offering Shares”), without par value, of SEAC II Corp., a Cayman Islands exempted company limited by shares (“New SEAC” or “Pubco”), which are expected to be issued to PIPE Investors (as defined below) in private placements immediately after the Amalgamations (as defined below) contemplated by the Business Combination (as defined below) pursuant to the terms of the Subscription Agreements (as defined below) in connection with the Business Combination. If the Business Combination is not consummated, the Offering Shares registered pursuant to this prospectus will not be issued.

On December 21, 2023, the board of directors of New SEAC (the “New SEAC Board”) and the board of directors of Screaming Eagle Acquisition Corp. (“SEAC” and its board of directors, the “SEAC Board”), respectively, approved a Business Combination Agreement, by and among SEAC, the parent company of New SEAC, New SEAC, Lions Gate Entertainment Corp., a British Columbia company (“Lions Gate Parent” or “Lionsgate”), LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of Lions Gate Parent (“Studio HoldCo”), LG Orion Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of Lions Gate Parent (“StudioCo”), SEAC MergerCo, a Cayman Islands exempted company and a direct, wholly-owned subsidiary of New SEAC (“MergerCo”), and 1455941 B.C. Unlimited Liability Company, a British Columbia unlimited liability company and a direct, wholly-owned subsidiary of SEAC (“New BC Sub”) (as amended on April 11, 2024 and as may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”). Pursuant to the Business Combination Agreement, among other things and subject to the terms and conditions contained therein and the plan of arrangement (i) SEAC will merge with and into MergerCo (the “SEAC Merger”) with MergerCo surviving the SEAC Merger as a direct, wholly-owned subsidiary of New SEAC (the resulting entity referred to herein as MergerCo or, where specified, the “SEAC Merger Surviving Company”), (ii) SEAC Merger Surviving Company will distribute all of its assets lawfully available for distribution to New SEAC by way of a cash dividend (the “Cash Distribution”), (iii) SEAC Merger Surviving Company will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Cayman Islands Companies Act (as revised) (the “Companies Act”) and the Business Corporations Act (British Columbia) (the “BC Act”) and convert to a British Columbia unlimited liability company in accordance with the BC Act (the “MergerCo Domestication and Conversion”), (iv) New SEAC will transfer by way of continuation from the Cayman Islands (the “New SEAC Domestication”, and together with the MergerCo Domestication and Conversion, the “Domestications”) to British Columbia in accordance with the Companies Act and continue as a British Columbia company in accordance with the applicable provisions of the BC Act, and (v) pursuant to an arrangement under Division 5 of Part 9 of the BC Act (the “Arrangement”), on the terms and subject to the conditions set forth in the Plan of Arrangement, (A) SEAC Merger Surviving Company and New BC Sub will amalgamate (the “MergerCo Amalgamation”) to form one corporate entity (“MergerCo Amalco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, (B) New SEAC and MergerCo Amalco will amalgamate (the “SEAC Amalgamation”) to form one corporate entity (“SEAC Amalco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, and (C) StudioCo and SEAC Amalco will amalgamate (the “StudioCo Amalgamation” and together with the MergerCo Amalgamation and the SEAC Amalgamation, the “Amalgamations”) to form one corporate entity (“Pubco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement. The SEAC Merger, the Cash Distribution, the Domestications and the Arrangement (which includes the Amalgamations), together with the other transactions contemplated by the Business Combination Agreement, the Plan of Arrangement and all other agreements, certificates and instruments entered into in connection therewith, are referred to herein as the “Business Combination.” If the Business Combination


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Agreement and the SEAC Merger are approved and adopted by SEAC’s shareholders and the closing conditions contemplated by the Business Combination Agreement are satisfied, New SEAC intends to effect a deregistration pursuant to and in accordance with Sections 206 through 209 of the Cayman Islands Companies Act (as revised) and a continuation and domestication as a British Columbia company in accordance with the Business Corporations Act (British Columbia), pursuant to which the New SEAC’s jurisdiction of incorporation will be changed from the Cayman Islands to British Columbia, Canada. In connection with the Business Combination, New SEAC intends to change its name to Lionsgate Studios Corp.

In connection with the Business Combination, concurrently with the execution of the Business Combination Agreement on December 22, 2023, and on April 11, 2024, SEAC, New SEAC and Lions Gate Parent entered into subscription agreements with the PIPE Investors pursuant to which the PIPE Investors have agreed, subject to the terms and conditions set forth therein, to subscribe for and purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 23,091,217 common shares of Pubco (the “PIPE Shares”), at a purchase price of $9.63 per share and $10.165 per share, respectively, for an aggregate cash amount of $225,000,000. Additionally, the Subscription Agreements provide certain PIPE Investors with certain reduction rights, pursuant to which the PIPE Investors may offset their total commitments under their respective Subscription Agreements to the extent such PIPE Investors purchase SEAC Class A Ordinary Shares (as defined below) in the open market or otherwise own such shares as of the date of the Subscription Agreement.

The Selling Shareholders may offer, sell or distribute all or a portion of the PIPE Shares registered hereby publicly or through private transactions at prevailing market prices or at negotiated prices. We will pay certain offering fees and expenses and fees in connection with the registration of the PIPE Shares and will not receive proceeds from the sale of the PIPE Shares by the Selling Shareholders. Class A ordinary shares, par value $0.0001 per share, of SEAC (a “SEAC Class A Ordinary Share”) and public warrants of SEAC (“SEAC Warrants”) are currently listed on the Nasdaq Capital Market (“Nasdaq”) and trade under the symbols “SCRM” and “SCRMW”, respectively. In addition, certain of the SEAC Class A Ordinary Shares and the SEAC Public Warrants currently trade as part of the SEAC Units, which are listed on Nasdaq under the symbol “SCRMU”. Upon consummation of the Business Combination (the “Closing” and the date of the Closing, the “Closing Date”), SEAC Public Shareholders who do not redeem their SEAC Class A Ordinary Shares will ultimately (as a result of the SEAC Merger and the Amalgamations) receive one (1) common share of Pubco (“Pubco Common Share”) for each SEAC Class A Ordinary Share held by them immediately prior to the SEAC Merger. One business day prior to the Closing Date and prior to the SEAC Merger, subject to the approval by the public warrantholders of SEAC (the “SEAC Public Warrantholders”), each then issued and outstanding SEAC Public Warrant will be automatically exchanged for $0.50 in cash. In addition, all of the SEAC Private Placement Warrants will be forfeited and cancelled for no consideration. It is anticipated that upon the Closing, the Pubco Common Shares will be listed on Nasdaq under the ticker symbol “LION”. Pubco will have no units or warrants traded following the Closing.

INVESTING IN OUR SECURITIES INVOLVES RISKS THAT ARE DESCRIBED IN THE “RISK FACTORS” SECTION BEGINNING ON PAGE 21 OF THIS PROSPECTUS.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is April  , 2024.


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TABLE OF CONTENTS

 

Selected Definitions

     1  

Cautionary Note Regarding Forward-Looking Statements

     7  

Summary of the Prospectus

     10  

The Offering

     19  

Risk Factors

     21  

Use of Proceeds

     41  

Unaudited Pro Forma Condensed Combined Financial Information

     42  

Management’s Discussion and Analysis of Financial Condition and Results of Operations of SEAC

     65  

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Studio Business of Lions Gate Entertainment Corp.

     75  

Business of LG Studios and Certain Information About StudioCo

     135  

Description of Pubco Securities

     149  

Securities Act Restrictions on Resale of Securities

     152  

Beneficial Ownership of Pubco Securities

     154  

Selling Shareholders

     155  

Management of Pubco After the Business Combination

     159  

Executive and Director Compensation

     167  

Certain Relationships and Related Party Transactions

     215  

United States Federal Income Tax Considerations

     221  

Plan of Distribution

     228  

Legal Matters

     230  

Experts

     231  

Where You can Find More Information

     232  

Index to Financial Information

     F-1  

You should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this prospectus is accurate as of any date other than that date.

For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

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SELECTED DEFINITIONS

Unless otherwise stated or unless the context otherwise requires, the term“SEAC” refer to Screaming Eagle Acquisition Corp., the terms “we,” “us,” “our,” “New SEAC” refer to SEAC II Corp. and “Pubco,” “combined company” and “post-combination company” refer to SEAC II Corp. (to be renamed as Lionsgate Studios Corp.) and its subsidiaries following the consummation of the Business Combination.

Unless the context otherwise requires, references in this prospectus to:

 

   

A&R Registration Rights Agreement” are to that certain amended and restated registration rights agreement Pubco, Studio HoldCo and SEAC Sponsor will enter into concurrently with the Closing.

 

   

Adjusted OIBDA” are to a non-GAAP measure calculated as operating income (loss) before adjusted depreciation and amortization (“OIBDA”), adjusted for adjusted share-based compensation, purchase accounting and related adjustments, restructuring and other costs, certain charges (benefits) related to the COVID-19 global pandemic, certain programming and content charges as a result of management changes and/or changes in strategy, and unusual gains or losses (such as goodwill and intangible asset impairment and charges related to Russia’s invasion of Ukraine), when applicable.

 

   

Aggregate Transaction Proceeds” are to an amount equal to the sum of (a) the amount of cash available in the Trust Account at Closing (subject to certain adjustments and after, for the avoidance of doubt, giving effect to redemptions but, for the avoidance of doubt, prior to the SEAC Public Warrant Exchange or the payment of any transaction expenses) plus (b) the aggregate cash proceeds actually received or deemed received by Pubco, SEAC, New SEAC or any of their applicable successors or assigns in respect of the PIPE.

 

   

Amalgamations” are to the SEAC Amalgamation, the MergerCo Amalgamation and the StudioCo Amalgamation, collectively.

 

   

Arrangement” are to an arrangement proposed by New BC Sub under Part 9, Division 5 of the BC Act on the terms and subject to the conditions set forth in the Plan of Arrangement, subject to any amendments or variations to the Plan of Arrangement made in accordance with the terms of the Business Combination Agreement or the provisions of the Plan of Arrangement or made at the directions of the Court in the Interim Order or Final Order with the prior written consent of SEAC and Lions Gate Parent, such consent not to be unreasonably withheld, conditioned or delayed.

 

   

BC Act” are to the Business Corporations Act (British Columbia).

 

   

Business Combination” are to the transactions, including the SEAC Merger, the Cash Distribution, the Domestications and the Amalgamations, contemplated by the Business Combination Agreement, the Plan of Arrangement and all other agreements entered into in connection therewith.

 

   

Business Combination Agreement” are to that certain Business Combination Agreement, dated December 22, 2023, as amended on April 11, 2024, by and among SEAC, New SEAC, Lions Gate Parent, Studio HoldCo, StudioCo, MergerCo and New BC Sub.

 

   

Class B Conversion” are to any remaining SEAC Class B Ordinary Shares being deemed cancelled and surrendered for no consideration pursuant to a surrender letter in connection with each of the 2,010,000 remaining SEAC Class B Ordinary Shares automatically converting into one SEAC Class A Ordinary Share immediately following the Sponsor Securities Repurchase.

 

   

Closing” are to the closing of the Business Combination.

 

   

Closing Date” are to the date of Closing.

 

   

Code” are to the U.S. Internal Revenue Code of 1986, as amended.

 

   

Companies Act” are to the Cayman Islands Companies Act (as amended).

 

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Court” are to the Supreme Court of British Columbia.

 

   

Deadline Date” are to the date by which SEAC must complete an Initial Business Combination, in accordance with the SEAC Articles.

 

   

Domestication(s)” are to the transfer of New SEAC and/or MergerCo by way of continuation from the Cayman Islands to British Columbia, Canada in accordance with the memorandum and articles of association of respective entities and the Companies Act and BC Act and the domestication of New SEAC and/or MergerCo as British Columbia company(y/ies) in accordance with the applicable provisions of the BC Act, including all matters necessary or ancillary in order to effect such transfer by way of continuation, including the adoption of the notice of articles and articles in connection with the continuation into British Columbia under the BC Act.

 

   

Exchange Act” are to the U.S. Securities Exchange Act of 1934, as amended.

 

   

Final Order” are to the final order of the Court pursuant to section 291 of the BC Act, approving the Arrangement, in a form acceptable to SEAC and Lions Gate Parent, each acting reasonably, as such order may be amended, modified, supplemented or varied by the Court with the consent of SEAC and Lions Gate Parent, such consent not to be unreasonably withheld, conditioned or delayed, at any time prior to the effective time of the Arrangement or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or amended, on appeal, provided that any such affirmation or amendment is acceptable to each of SEAC and Lions Gate Parent, each acting reasonably.

 

   

Form S-4/A” are to New SEAC’s Form S-4/A (File No. 333-276414), last filed with the SEC on April 12, 2024.

 

   

GAAP” are to generally accepted accounting principles.

 

   

Initial Business Combination” are to SEAC’s initial merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more business.

 

   

Interim Order” are to the interim order of the Court contemplated by Section 2.02 of the Business Combination Agreement and made pursuant to section 291 of the BC Act, providing for, among other things, the calling and holding of the SEAC Shareholders’ Meeting, as the same may be amended, modified, supplemented or varied by the Court with the consent of SEAC and Lions Gate Parent, such consent not to be unreasonably withheld, conditioned or delayed, provided that any such amendment is reasonably acceptable to each of SEAC and Lions Gate Parent. A copy of the Interim Order is attached as Annex P to the Form S-4/A.

 

   

Investment Canada Act” are to the Investment Canada Act (Canada) and the regulations made thereunder.

 

   

IRS” are to the U.S. Internal Revenue Service.

 

   

ITA” are to the Income Tax Act (Canada) and the regulations made thereunder as amended from time to time.

 

   

LG Internal Restructuring” are to a series of transactions, which, if completed in their entirety, will result in the transfer of the Studio Business from Lions Gate Parent to StudioCo and the retention of Lions Gate Parent of the Starz Business.

 

   

Lions Gate Parent” or “Lionsgate” are to Lions Gate Entertainment Corp., a British Columbia company.

 

   

LG Parties” are to Lions Gate Parent, Studio HoldCo and StudioCo.

 

   

LG Studios” are to StudioCo assuming, unless the context otherwise requires, the completion of the LG Internal Restructuring pursuant to which StudioCo shall, directly or indirectly, own the Studio Business.

 

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Lock-Up Agreement” are to the lock-up agreement by which the SEAC Sponsor and its transferees and holders of Pubco Common Shares affiliated with Lions Gate Parent (collectively, the “Lockup Shareholders”) will become bound on the Closing Date pursuant to the Business Combination Agreement and as set forth in the Plan of Arrangement.

 

   

Maximum Redemption Scenario” are to the redemption scenario assuming that holders of an additional 5,531,192 SEAC Class A Ordinary Shares, or approximately 32% of the currently outstanding SEAC Class A Ordinary Shares following the Extension Meeting, exercise redemption rights with respect to such shares for their pro rata share of the funds in the Trust Account. As the Business Combination Agreement includes a Minimum Cash Condition that, at the Closing, Aggregate Transaction Proceeds be at least equal to $350.0 million in cash, including (i) at least $125.0 million in cash from the Trust Account (subject to adjustments and after reduction for the aggregate amount of payments required to be made in connection with any redemptions), plus (ii) the aggregate amount of cash that has been funded pursuant to the PIPE. Thus, the redemption of 5,531,192 SEAC Class A Ordinary Shares represents the estimated maximum number of SEAC Class A Ordinary Shares that can be redeemed while still achieving the Minimum Cash Condition.

 

   

MergerCo” are to SEAC MergerCo, a Cayman Islands exempted company and a direct wholly-owned subsidiary of New SEAC, through the continuation into British Columbia under the BC Act.

 

   

MergerCo Amalgamation” are to the amalgamation of SEAC Merger Surviving Company and New BC Sub pursuant to the Plan of Arrangement to form one corporate entity (“MergerCo Amalco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement.

 

   

MergerCo Class A Common Shares” are to the Class A common shares in the authorized share structure of SEAC Merger Surviving Company.

 

   

Nasdaq” are to The Nasdaq Stock Market LLC.

 

   

New BC Sub” are to 1455941 B.C. Unlimited Liability Company, and a British Columbia unlimited liability company and a direct, wholly-owned subsidiary of SEAC.

 

   

New SEAC” are to SEAC II Corp., a Cayman Islands exempted company and a wholly-owned subsidiary of SEAC, which in connection with the Business Combination will effect a deregistration pursuant to and in accordance with the Companies Act and a continuation and domestication as a British Columbia company in accordance with the BC Act, pursuant to which jurisdiction of New SEAC will be changed from the Cayman Islands to British Columbia, Canada.

 

   

New SEAC Domestication” are to New SEAC transferring by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and continuing as a British Columbia company in accordance with the applicable provisions of the BC Act.

 

   

Newly Issued Reduction Right Shares” means any newly issued SEAC Class A Ordinary Shares that may be issued to such PIPE Investors in connection with their purchase of the Reduction Right Shares.

 

   

No Redemption Scenario” or “No Additional Redemption Scenario” are to the redemption scenario assuming that none of the holders of SEAC Class A Ordinary Shares exercise redemption rights with respect to such shares in connection with the Business Combination (but takes into account redemptions that already occurred in connection with the Extension Meeting).

 

   

Offering Shares” are to PIPE Shares being registered herein.

 

   

Outside Date” are to June 15, 2024, which can be extended to July 31, 2024 by SEAC or Lions Gate Parent subject to the conditions in the Business Combination Agreement.

 

   

Pubco Sponsor Options” are to the options of Pubco to be issued to SEAC Sponsor in connection with the Closing, each of which is exercisable to purchase one Pubco Common Share.

 

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PIPE” are to a private placement to close immediately following the Amalgamations and conditioned upon the effectiveness of the consummation of the Business Combination, for an aggregate investment price equal to $225,000,000.

 

   

PIPE Investors” are to those certain investors participating in the PIPE pursuant to the Subscription Agreements.

 

   

PIPE Shares” are to the 23,091,217 Pubco Common Shares to be issued to the PIPE Investors in connection with the Business Combination.

 

   

Plan of Arrangement” are to the Plan of Arrangement in respect of the Arrangement, the form of which is attached as Annex B to the Form S-4/A, subject to any amendments or variations to such plan made in accordance with the Business Combination Agreement and the Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of StudioCo and SEAC, each acting reasonably.

 

   

Private Placement” are to the issuance of an aggregate of 23,091,217 Pubco Common Shares pursuant to the Subscription Agreements to the PIPE Investors immediately following the Amalgamations, at a purchase price of $9.63 per share and $10.165 per share, as applicable.

 

   

Pubco” are to New SEAC, as such entity exists on the date hereof and as it is continued and amalgamated in connection with the Business Combination. Pubco intends to change its name to Lionsgate Studios Corp. following the Business Combination.

 

   

Pubco Board” are to the board of directors of Pubco following the StudioCo Amalgamation.

 

   

Pubco Closing Articles” are to the notice of articles and articles of Pubco to be adopted at the StudioCo Amalgamation Effective Time.

 

   

Pubco Common Shares” are to, collectively, the Pubco common shares in the authorized share capital of Pubco.

 

   

Pubco Shareholders” are to subsequent to the StudioCo Amalgamation, the shareholders of Pubco.

 

   

Reduction Right Shares” are to shares purchased by the PIPE Investors for which they have exercised their reduction right in accordance with the terms of the Subscription Agreements.

 

   

Registration Statement” are to this registration statement on Form S-1 filed with the SEC by Pubco, as it may be amended or supplemented from time to time, of which this prospectus forms a part.

 

   

Sarbanes-Oxley Act” are to the U.S. Sarbanes-Oxley Act of 2002.

 

   

SEAC” are to Screaming Eagle Acquisition Corp., a Cayman Islands exempted company.

 

   

SEAC Amalgamation” are to the amalgamation of New SEAC and MergerCo Amalco pursuant to the Plan of Arrangement to form one corporate entity (“SEAC Amalco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement.

 

   

SEAC Articles” are to the amended and restated memorandum and articles of association of SEAC, adopted by Special Resolution dated January 4, 2022, effective on January 5, 2022, and as amended on April 9, 2024, as may be further amended and/or restated from time to time.

 

   

SEAC Board” are to the board of directors of SEAC.

 

   

SEAC Class A Ordinary Shares” are to SEAC’s Class A ordinary shares, par value $0.0001 per share, which are subject to possible redemption.

 

   

SEAC Class B Ordinary Shares” are to SEAC’s Class B ordinary shares, par value $0.0001 per share.

 

   

SEAC Entities” are to, collectively, New SEAC, MergerCo and New BC Sub.

 

   

SEAC Founder Shares” are to the issued and outstanding SEAC Class B Ordinary Shares.

 

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SEAC Insiders” are to SEAC Sponsor and the directors and officers of SEAC.

 

   

SEAC IPO” are to SEAC’s initial public offering of SEAC Units, which closed on January 10, 2022.

 

   

SEAC management” are to SEAC’s officers and directors.

 

   

SEAC Meetings” are to the SEAC Shareholders’ Meeting and the SEAC Public Warrantholders’ Meeting.

 

   

SEAC Merger” are to SEAC’s merger with MergerCo, where SEAC merges into MergerCo, with MergerCo being the surviving entity (the resulting entity referred to herein as MergerCo or, where specified, the “SEAC Merger Surviving Company”).

 

   

SEAC Ordinary Shares” are to the SEAC Class A Ordinary Shares and the SEAC Class B Ordinary Shares.

 

   

SEAC Private Placement Warrants” are to the warrants issued to SEAC Sponsor in a private placement simultaneously with the closing of the SEAC IPO.

 

   

SEAC Public Shareholders” are to the holders of SEAC Public Shares.

 

   

SEAC Public Shares” are to SEAC Class A Ordinary Shares sold as part of the SEAC Units in the SEAC IPO (whether they were purchased in the SEAC IPO or thereafter in the open market).

 

   

SEAC Public Warrantholders’ Meeting” are to the extraordinary general meeting of SEAC Public Warrantholders that is the subject of this prospectus and any adjournments thereof.

 

   

SEAC Public Warrantholders” are to the holders of SEAC Public Warrants.

 

   

SEAC Public Warrants” are to the warrants sold as part of the SEAC Units in the SEAC IPO (whether they were purchased in the SEAC IPO or thereafter in the open market).

 

   

SEAC Securities” are to SEAC Units, SEAC Ordinary Shares and SEAC Warrants, collectively.

 

   

SEAC Shareholders” are to, collectively, the SEAC Sponsor and the SEAC Public Shareholders.

 

   

SEAC Shareholders’ Meeting” are to the extraordinary general meeting of SEAC Shareholders to be held on May 7, 2024 and any adjournments thereof.

 

   

SEAC Sponsor” are to Eagle Equity Partners V, LLC, a Delaware limited liability company.

 

   

SEAC Sponsor Options” are to the 2,200,000 SEAC Sponsor Options to be issued to the SEAC Sponsor one business day prior to the Closing, as a partial consideration for the Sponsor Securities Repurchase. Each of SEAC Sponsor Options will entitle SEAC Sponsor to purchase one SEAC Class A Ordinary Share at $0.0001 per share if certain vesting conditions are met within 5 years of the Closing Date. In connection with the Business Combination, the SEAC Sponsor Options will ultimately become options to purchase Pubco Common Shares pursuant to the terms of the Sponsor Option Agreement.

 

   

SEAC Units” are to the units of SEAC sold in the SEAC IPO, each of which consists of one SEAC Class A Ordinary Share and one-third of one SEAC Public Warrant.

 

   

SEAC Warrant Agreement” are to the Warrant Agreement, dated January 10, 2022, between SEAC and Continental Stock Transfer & Trust Company, as warrant agent.

 

   

SEAC Warrant Agreement Amendment” are to an amendment to the SEAC Warrant Agreement, pursuant to which, one business day prior to the Closing, each then issued and outstanding SEAC Public Warrant will be automatically exchanged for $0.50 in cash, and all of the issued and outstanding SEAC Private Placement Warrants will be forfeited and cancelled for no consideration, the form of which is attached as Annex F to the Form S-4/A.

 

   

SEAC Warrants” are to the SEAC Private Placement Warrants and the SEAC Public Warrants, collectively.

 

   

SEAC Warrant Support Investors” are to those certain SEAC Public Warrantholders who entered into Warrantholder Support Agreements.

 

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SEAC Sponsor” are to Eagle Equity Partners V, LLC, a Delaware limited liability company.

 

   

SEC” are to the U.S. Securities and Exchange Commission.

 

   

Securities Act” are to the U.S. Securities Act of 1933, as amended.

 

   

Special Resolution” are to a resolution passed by a majority of not less than two-thirds (66 2/3%) of the SEAC Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the SEAC Shareholders’ Meeting.

 

   

Sponsor Support Agreement” are to that certain letter agreement dated as of December 22, 2023, by and among SEAC Sponsor, SEAC, StudioCo and Lions Gate Parent, a copy of which is attached hereto as Annex G to the Form S-4/A.

 

   

Sponsor Option Agreement” are to the sponsor option agreement that SEAC, New SEAC and the Sponsor will enter into, in connection with the Sponsor Securities Repurchase, one business day prior to the Closing, a copy of which is attached as Annex H to the Form S-4/A.

 

   

Starz Business” are to substantially all of the assets and liabilities constituting Lions Gate Parent’s Media Networks segment.

 

   

StudioCo” are to LG Orion Holdings ULC, a British Columbia unlimited liability company.

 

   

StudioCo Amalgamation” are to the amalgamation of StudioCo’s and SEAC Amalco pursuant to the Plan of Arrangement to form one corporate entity (“Pubco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement.

 

   

StudioCo Amalgamation Effective Time” are to the effective time of the StudioCo Amalgamation.

 

   

Studio Business” are to substantially all of the assets and liabilities constituting Lions Gate Parent’s Motion Picture and Television Production segments and a substantial portion of Lions Gate Parent’s corporate general and administrative functions.

 

   

Studio HoldCo” are to LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly owned subsidiary of Lions Gate Parent.

 

   

Subscription Agreements” are to, the subscription agreements SEAC, New SEAC and Lions Gate Parent entered into with the PIPE Investors concurrently with the execution of the Business Combination Agreement and on April 11, 2024, a form of which is attached as Annex D to the Form S-4/A.

 

   

Transfer Agent” are to Continental Stock Transfer & Trust Company, as transfer agent of SEAC.

 

   

Trading Price” are to the daily closing price of the Pubco Common Shares (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within a period of thirty (30) consecutive trading days beginning thirty (30) days or more after the Closing.

 

   

Trust Account” are to the trust account that holds proceeds from the SEAC IPO and the concurrent private placement of the SEAC Private Placement Warrants, established by SEAC for the benefit of the SEAC Public Shareholders, maintained by Continental Stock Transfer & Trust Company, acting as trustee.

 

   

Warrantholder Support Agreements” are to those certain investor rights agreements entered into between StudioCo and certain SEAC Public Warrantholders concurrently with the execution of the Business Combination Agreement.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this prospectus constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect SEAC’s, Lions Gate Parent’s or StudioCo’s current views, as applicable, with respect to, among other things, their respective capital resources, performance and results of operations. Likewise, all of Lions Gate Parent’s and StudioCo’s statements regarding anticipated growth in operations, anticipated market conditions, demographics and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook”, “believe”, “expect”, “potential”, “continue”, “may”, “will”, “should”, “could”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or the negative version of these words or other comparable words or phrases.

The forward-looking statements contained in this prospectus reflect SEAC’s, Lions Gate Parent’s or StudioCo’s current views, as applicable, about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in any forward-looking statement. None of SEAC, Lions Gate Parent or StudioCo guarantees that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

 

   

possible delays in closing the Business Combination, whether due to the inability to obtain SEAC Shareholder Approval or SEAC Public Warrantholder Approval, or failure to satisfy any of the conditions to closing the Business Combination, as set forth in the Business Combination Agreement;

 

   

the inability of the Business Combination, or an alternate business combination, to be completed by the Deadline Date, and the potential failure of SEAC to obtain an extension of the Deadline Date if sought by SEAC;

 

   

any waivers of the conditions to Closing as may be permitted in the Business Combination Agreement;

 

   

general economic uncertainty;

 

   

the volatility of currency exchange rates;

 

   

StudioCo’s ability to manage growth;

 

   

Pubco’s ability to obtain or maintain the listing of Pubco Common Shares on Nasdaq or any other national exchange following the Business Combination;

 

   

risks related to the rollout of StudioCo’s business and expansion strategy;

 

   

the effects of competition on StudioCo’s future business;

 

   

potential disruption in Lions Gate Parent’s employee retention as a result of the Business Combination;

 

   

the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which Pubco operates or will operate in the future;

 

   

international, national or local economic, social or political conditions that could adversely affect the companies and their business;

 

   

the effectiveness of Pubco’s internal controls and its corporate policies and procedures;

 

   

changes in personnel and availability of qualified personnel;

 

   

the volatility of the market price and liquidity of SEAC Units, SEAC Public Shares and SEAC Public Warrants;

 

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potential write-downs, write-offs, restructuring and impairment or other charges required to be taken by Pubco subsequent to the Business Combination;

 

   

the possibility that the SEAC Board’s valuation of StudioCo was inaccurate, including the failure of SEAC’s diligence review to identify all material risks associated with the Business Combination;

 

   

the volatility of the market price and liquidity of Pubco Common Shares;

 

   

factors relating to the business, operations and financial performance of LG Studios and its subsidiaries and the Studio Business, including:

 

   

the anticipated benefits of the Business Combination may not be achieved;

 

   

changes in LG Studios’ business strategy, plans for growth or restructuring may increase its costs or otherwise affect its profitability;

 

   

LG Studios’ revenues and results of operations may fluctuate significantly;

 

   

the Studio Business relies on a few major retailers and distributors and the loss of any of those could reduce its revenues and operating results;

 

   

the Studio Business does not have long-term arrangements with many of its production or co- financing partners;

 

   

protecting and defending against intellectual property claims may have a material adverse effect on the Studio Business;

 

   

changes in consumer behavior, as well as evolving technologies and distribution models, may negatively affect the Studio Business, financial condition or results of operations;

 

   

LG Studios could be adversely affected by labor disputes, strikes or other union job actions;

 

   

LG Studios will be subject to risks associated with possible acquisitions, dispositions, business combinations, or joint ventures; and

 

   

business interruptions from circumstances or events out of LG Studios’ control could adversely affect LG Studios’ operations.

Forward-looking statements regarding expected ownership of Pubco Common Shares by existing SEAC Shareholders and Lions Gate Parent Shareholders following the Business Combination have been calculated based on each of SEAC’s and StudioCo’s outstanding share capital, each as of the date of this prospectus. The statements contained under the heading “LG Studios Projected Financial Information” in this prospectus are considered forward-looking statements. Forward-looking statements representing post-closing expectations are inherently uncertain. Estimates such as expected revenue, production, operating expenses, Adjusted OIBDA, general and administrative expenses, capital expenditures, free cash flow, net debt, reserves and other measures are preliminary in nature. There can be no assurance that the forward-looking statements will prove to be accurate and reliance should not be placed on these estimates in making investment decisions. See the other cautionary statements under “LG Studios Projected Financial Information” for further information.

The forward-looking statements contained herein are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the forward-

looking statements. For a further discussion of the risks and other factors that could cause SEAC’s, StudioCo’s or Pubco’s future results, performance or transactions to differ significantly from those expressed in any forward-looking statements, please see the section entitled “Risk Factors”. There may be additional risks that SEAC, StudioCo and/or Lions Gate Parent do not presently know or that SEAC, StudioCo and/or Lions Gate Parent currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions made in making these forward-looking statements prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. While such forward-looking

 

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statements reflect SEAC’s, StudioCo’s and Lions Gate Parent’s good faith beliefs, as applicable, they are not guarantees of future performance. SEAC, StudioCo and Lions Gate Parent disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this prospectus, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to SEAC, StudioCo and Lions Gate Parent, as applicable.

 

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SUMMARY OF THE PROSPECTUS

This summary highlights selected information included in this prospectus and does not contain all of the information that may be important to you in making an investment decision. This summary is qualified in its entirety by the more detailed information included in this prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the information under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SEAC,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Studio Business of Lions Gate Entertainment Corp.” and the financial statements included elsewhere in this prospectus.

Information About the Parties to the Business Combination

SEAC

SEAC is a blank check company incorporated as a Cayman Islands exempted company on November 3, 2021, for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving SEAC and one or more target businesses.

SEAC’s securities are traded on Nasdaq under the ticker symbols “SCRM”, “SCRMU” and “SCRMW”. In connection with the Closing, the SEAC Securities will be delisted from Nasdaq.

SEAC’s sponsor is Eagle Equity Partners V, LLC, a Delaware limited liability company. The sole managing member of SEAC Sponsor is EEP Holdings – SC, LLC (“EEP Holdings”), a Delaware limited liability company. EEP Holdings is controlled by Eli Baker, Harry E. Sloan and Jeff Sagansky, each of whom is a U.S. person. The business of SEAC Sponsor is to invest in the securities of SEAC.

The mailing address of SEAC’s principal executive office is 955 Fifth Avenue, New York, NY 10075, and its telephone number is (310) 209-7280.

New SEAC

New SEAC is SEAC II Corp., a Cayman Islands exempted company and a wholly-owned subsidiary of SEAC. Prior to the consummation of the Business Combination described herein, New SEAC intends to effect a deregistration pursuant to and in accordance with Sections 206 through 209 of the Companies Act and a continuation and domestication as a British Columbia company in accordance with the BC Act, pursuant to which jurisdiction of incorporation of New SEAC will be changed from the Cayman Islands to British Columbia, Canada. In connection with the Business Combination, New SEAC (which we refer to as Pubco following the Business Combination) intends to change its name to Lionsgate Studios Corp.

MergerCo

MergerCo is SEAC MergerCo, a Cayman Islands exempted company and a wholly-owned subsidiary of New SEAC.

New BC Sub

New BC Sub is 1455941 B.C. Unlimited Liability Company, a British Columbia unlimited liability company and a wholly-owned subsidiary of SEAC.

Lions Gate Parent

Lions Gate Parent, or Lionsgate, is Lions Gate Entertainment Corp., a British Columbia corporation. Lions Gate Parent was incorporated under the Canada Business Corporations Act using the name 3369382 Canada Limited

 

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on April 28, 1997, amended its articles on July 3, 1997 to change its name to Lions Gate Entertainment Corp., and on September 24, 1997, continued under the Business Corporations Act (British Columbia).

Lions Gate Parent, and its Studio Business, encompasses a world-class motion picture and television studio operations, designed to bring a unique and varied portfolio of entertainment to consumers around the world. Its film, television and location-based entertainment businesses are backed by a more than 20,000-title library and a valuable collection of iconic film and television franchises.

Lions Gate Parent’s securities are traded on the New York Stock Exchange under the ticker symbols “LGF.A” and “LGF.B”.

The mailing address of Lions Gate Parent’s principal executive office is 2700 Colorado Avenue, Santa Monica, CA 90404, and its telephone number is (310) 449-9200. Lions Gate Parent’s head office address is located at 250 Howe Street, 20th Floor, Vancouver, British Columbia V6C 3R8.

Studio HoldCo

Studio HoldCo is LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly owned subsidiary of Lions Gate Parent.

StudioCo

StudioCo is LG Orion Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of Lions Gate Parent. StudioCo exists for the purpose of holding Lions Gate Parent’s Studio Business and amalgamating with New SEAC in connection with the transactions described in this prospectus. Prior to the contribution of the Studio Business to StudioCo by Lions Gate Parent, which will occur prior to the StudioCo Amalgamation, StudioCo will have no operations other than those incidental to the transactions contemplated in the Business Combination Agreement and the potential completion of one or more financing transactions as further described in this prospectus.

Following the completion of the LG Internal Restructuring and prior to the Closing, StudioCo shall, directly or indirectly, own the assets and assume the liabilities of the Studio Business, which we refer to as LG Studios. LG Studios encompasses world-class motion picture and television studio operations, designed to bring a unique and varied portfolio of entertainment to consumers around the world. LG Studios’ film, television and location-based entertainment businesses are backed by a more than 20,000-title library and a valuable collection of iconic film and television franchises. A digital age company driven by its entrepreneurial culture and commitment to innovation, the Lionsgate brand is synonymous with bold, original, relatable entertainment for audiences worldwide. LG Studios manages and reports its operating results through two reportable business segments: Motion Picture and Television Production. See the section entitled “Business of LG Studios and Certain Information About StudioCo” for more information.

The mailing address of StudioCo’s principal executive office is 2700 Colorado Avenue, Santa Monica, CA 90404, and its telephone number is (310) 449-9200.

The Business Combination

On December 22, 2023, SEAC, New SEAC, Lions Gate Parent, Studio HoldCo, StudioCo, MergerCo and New BC Sub, entered into the Business Combination Agreement, which was amended on April 11, 2024, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement and the Plan of Arrangement, (i) SEAC will merge with and into MergerCo with SEAC Merger

 

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Surviving Company as the resulting entity, (ii) SEAC Merger Surviving Company will distribute all of its assets lawfully available for distribution to New SEAC by way of a cash dividend, (iii) SEAC Merger Surviving Company will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and convert to a British Columbia unlimited liability company in accordance with the applicable provisions of the BC Act, (iv) New SEAC will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and continue as a British Columbia company in accordance with the applicable provisions of the BC Act, and (v) in pursuant to an arrangement under Division 5 of Part 9 of the BC Act (the “Arrangement”) and on the terms and subject to the conditions set forth in the Plan of Arrangement, (A) SEAC Merger Surviving Company and New BC Sub will amalgamate to form MergerCo Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, (B) New SEAC and MergerCo Amalco will amalgamate to form SEAC Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement and (C) StudioCo and SEAC Amalco will amalgamate to form Pubco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement. The Arrangement is subject to the approval by the Court under the BC Act. Details regarding the terms and conditions of the Business Combination are contained in the Business Combination Agreement.

If the Business Combination Agreement and the SEAC Merger are approved and adopted and the Business Combination is consummated, New SEAC will effect a deregistration pursuant to and in accordance with Sections 206 through 209 of the Cayman Islands Companies Act (as revised) and a continuation and domestication as a British Columbia company in accordance with the Business Corporations Act (British Columbia), pursuant to which the New SEAC’s jurisdiction of incorporation will be changed from the Cayman Islands to British Columbia, Canada. In connection with the Business Combination, New SEAC intends to change its name to Lionsgate Studios Corp.

 

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Structure of the Business Combination

The following diagram illustrates the organizational structure of SEAC and LG Studios immediately prior to the Business Combination:

 

 

LOGO

The following diagram illustrates the structure of Pubco immediately following the Business Combination. The percentages shown reflect the voting power and economic interests in Pubco on a combined basis, assuming no additional redemptions. Interests shown exclude any Pubco Common Shares that may be issuable to SEAC Sponsor upon vesting of the Pubco Sponsor Options after the Closing. Please see the subsection entitled “Ownership of Pubco Common Shares After Closing” for additional assumptions used in calculating such percentages.

 

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LOGO

 

 

LOGO

 

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The Private Placement

Concurrently with the execution of the Business Combination Agreement and on April 11, 2024, SEAC, New SEAC and Lions Gate Parent entered into subscription agreements with the PIPE Investors pursuant to which the PIPE Investors have agreed, subject to the terms and conditions set forth therein, to subscribe for and purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 23,091,217 PIPE Shares, at a purchase price of $9.63 per share and $10.165 per share, respectively, for an aggregate cash amount of $225,000,000. Additionally, the Subscription Agreements provide certain PIPE Investors with certain reduction rights, pursuant to which the PIPE Investors may offset their total commitments under their respective Subscription Agreements to the extent such PIPE Investors purchase SEAC Class A Ordinary Shares in the open market or otherwise own such shares as of the date of the Subscription Agreement, for up to an additional 2,018,951 PIPE Shares that may be issued to PIPE Investors who exercise such reduction rights.

Stock Exchange Listing

Listing of Pubco Common Shares on Nasdaq

New SEAC will apply to have the Pubco Common Shares listed on Nasdaq. Listing is subject to the approval of Nasdaq, respectively, in accordance with their respective original listing requirements. There is no assurance that Nasdaq will approve Pubco’s listing applications. Any such listing of the Pubco Common Shares will be conditional upon Pubco fulfilling all of the listing requirements and conditions of Nasdaq. It is anticipated that upon the Closing the Pubco Common Shares will be listed on Nasdaq under the ticker symbol “LION”.

Delisting of SEAC Securities and Deregistration of SEAC

SEAC and Lions Gate Parent anticipate that, following consummation of the Business Combination, the SEAC Class A Ordinary Shares, SEAC Units and SEAC Warrants will be delisted from Nasdaq, and SEAC will be deregistered under the Exchange Act.

Summary of Risk Factors

Investing in our securities involves risks. You should carefully consider the risks described in “Risk Factors” beginning on page 22 before making a decision to invest in Pubco Common Shares. If any of these risks actually occurs, our business, financial condition and results of operations would likely be materially adversely affected. Some of the risks related to Pubco and StudioCo’s business and industry and the Business Combination are summarized below.

Risks Related to the Studio Business

 

   

LG Studios faces substantial capital requirements and financial risks.

 

   

LG Studios may incur significant write-offs if its projects do not perform well enough to recoup costs.

 

   

Changes in LG Studios’ business strategy, plans for growth or restructuring may increase its costs or otherwise affect its profitability.

 

   

LG Studios’ revenues and results of operations may fluctuate significantly.

 

   

LG Studios’ content licensing arrangements, primarily those relating to the distribution of films in foreign territories, may include minimum guarantee arrangements which, absent such arrangements, could adversely affect our results of operations.

 

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The Studio Business does not have long-term arrangements with many of its production or co- financing partners.

 

   

The Studio Business relies on a few major retailers and distributors and the loss of any of those could reduce its revenues and operating results.

 

   

A significant portion of the Studio Business’ library revenues comes from a small number of titles.

 

   

Changes in consumer behavior, as well as evolving technologies and distribution models, may negatively affect LG Studios’ business, financial condition or results of operations.

 

   

LG Studios expects to face substantial competition in all aspects of its business.

 

   

LG Studios faces economic, political, regulatory, and other risks from doing business internationally.

 

   

LG Studios will be subject to risks associated with possible acquisitions, dispositions, business combinations, or joint ventures.

 

   

If Entertainment One Canada Ltd. loses Canadian status, it could lose licenses, incentives and tax credits.

 

   

Lions Gate Parent may fail to realize the anticipated benefits of the acquisition of eOne.

 

   

LG Studios’ success will depend on attracting and retaining key personnel and artistic talent.

 

   

Global economic turmoil and regional economic conditions could adversely affect LG Studios’ business.

 

   

LG Studios could be adversely affected by labor disputes, strikes or other union job actions.

 

   

Business interruptions from circumstances or events out of LG Studios’ control could adversely affect LG Studios’ operations.

 

   

LG Studios’ business is dependent on the maintenance and protection of its intellectual property and pursuing and defending against intellectual property claims may have a material adverse effect on LG Studios’ business.

 

   

The Studio Business involves risks of liability claims for content of material, which could adversely affect LG Studios’ business, results of operations and financial condition.

 

   

Piracy of films and television programs could adversely affect LG Studios’ business over time.

 

   

LG Studios may rely upon “cloud” computing services to operate certain aspects of its service and any disruption of or interference with its use of its “cloud” computing servicer could impact its operations and its business could be adversely impacted.

 

   

LG Studios’ activities are subject to stringent and evolving obligations which may adversely impact its operations. LG Studios’ actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of its business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse business consequences.

 

   

Service disruptions or failures of LG Studios or its third-party service providers’ information systems may disrupt its businesses, damage its reputation, expose it to regulatory investigations, actions, litigation, fines and penalties or have a negative impact on its results of operations including but not limited to a loss of revenue or profit, loss of customers or sales and other adverse consequences.

 

   

LG Studios may incur debt obligations that could adversely affect its business and profitability and its ability to meet other obligations.

 

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The terms of the Lions Gate Parent Credit Agreement (as defined below) and the Lions Gate Parent Indenture (as defined below) restrict LG Studios’ current and future operations, particularly LG Studios’ ability to respond to changes or to take certain actions.

 

   

The U.S. Internal Revenue Service may not agree that Pubco should be treated as a non-U.S. corporation for U.S. federal tax purposes and may not agree that its U.S. affiliates should not be subject to certain adverse U.S. federal income tax rules.

 

   

Future changes to U.S. and non-U.S. tax laws could adversely affect Pubco.

 

   

Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible.

 

   

Pubco’s tax rate is uncertain and may vary from expectations.

 

   

Legislative or other governmental action in the U.S. could adversely affect Pubco’s business.

 

   

Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect Pubco’s effective tax rates.

Risks Related to Ownership of Pubco’s Securities

 

   

Pubco cannot be certain that an active trading market for its common shares will develop or be sustained after the Business Combination, and following the completion of the Business Combination, its share price may fluctuate significantly as a result of numerous factors beyond Pubco’s control.

 

   

Pubco does not expect to pay any cash dividends for the foreseeable future.

 

   

If securities or industry analysts do not publish research or publish misleading or unfavorable research about Pubco’s business, Pubco’s share price and trading volume could decline.

 

   

Upon consummation of the Business Combination, the rights and obligations of a Pubco shareholder will be governed by British Columbia law and may differ from the rights and obligations of shareholders of companies organized under the laws of other jurisdictions.

Controlled Company Exemption

Following the completion of the Business Combination, Lions Gate Parent will control a majority of the voting power of the outstanding Pubco Common Shares. As a result, Pubco will be a “controlled company” within the meaning of the Nasdaq rules, and Pubco may qualify for and rely on exemptions from certain corporate governance requirements. Under Nasdaq corporate governance standards, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements to:

 

   

have a board that includes a majority of “independent directors”, as defined under Nasdaq rules;

 

   

have a compensation committee of the board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

have independent director oversight of director nominations.

 

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Pubco may rely on the exemption from having a board that includes a majority of “independent directors” as defined under Nasdaq rules. Pubco may elect to rely on additional exemptions and it will be entitled to do so for as long as Pubco is considered a “controlled company”, and to the extent it relies on one or more of these exemptions, holders of Pubco Common Shares will not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq corporate governance requirements.

 

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THE OFFERING

 

Issuer

SEAC II Corp.

 

  In connection with and prior to the consummation of the Business Combination, New SEAC will effect a deregistration pursuant to and in accordance with Sections 206 through 209 of the Cayman Islands Companies Act (as revised) and a continuation and domestication as a British Columbia company in accordance with the Business Corporations Act (British Columbia), pursuant to which the New SEAC’s jurisdiction of incorporation will be changed from the Cayman Islands to British Columbia, Canada. In connection with the Business Combination, the New SEAC intends to change its name to Lionsgate Studios Corp. If the Business Combination is not consummated, the Pubco Common Shares registered pursuant to this prospectus will not be issued.

 

Pubco Common Shares offered by the Selling Shareholders

Up to 25,110,168 shares of Pubco Common Shares, which include 23,091,217 PIPE Shares that are expected to be issued immediately following the Amalgamations and prior to the consummation of the Business Combination pursuant to the terms of the Subscription Agreements, an additional 2,018,951 PIPE Shares that may be issued to PIPE Investors who exercise reduction rights, which we refer to herein as “Newly Issued Reduction Right Shares.”

 

SEAC Ordinary Shares outstanding prior to the consummation of the Business Combination

35,925,223 Ordinary Shares issued and outstanding in the aggregate as of April 22, 2024. Of these 35,925,223 Ordinary Shares, 17,175,223 were SEAC Class A Ordinary Shares and 18,750,000 were SEAC Class B Ordinary Shares.

 

Pubco Common Shares outstanding after the consummation of the Business Combination

295,712,234 Pubco Common Shares under the No Redemption Scenario and 290,181,042 Pubco Common Shares under the Maximum Redemptions Scenario issued and outstanding after the Closing, which amounts exclude any additional shares that may be issued to PIPE Investors who exercise their reduction rights.

 

Use of proceeds

We will not receive any of the proceeds from the sale of the Pubco Common Shares by the Selling Shareholders.

 

Market for SEAC Class A ordinary shares and Pubco Common Shares

SEAC Class A Ordinary Shares, SEAC’s units and SEAC Public Warrants are currently traded on Nasdaq under the ticker symbols “SCRM”, “SCRMU” and “SCRMW,” respectively. We intend to list the Pubco Common Shares on Nasdaq under the ticker symbol “LION” upon the Closing. Pubco will not have units or warrants traded.

 

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Risk factors

Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” and elsewhere in this prospectus.

 

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with all of the other information included in this prospectus, before making an investment decision. Our business, prospects, financial condition or operating results could decline due to any of these risks and, as a result, you may lose all or part of your investment.

Risks Related to the Studio Business

LG Studios faces substantial capital requirements and financial risks.

The production, acquisition and distribution of motion picture and television content requires substantial capital. A significant amount of time may elapse between expenditure of funds and the receipt of revenues after release or distribution of such content. LG Studios cannot assure you that it is able to successfully implement arrangements to reduce the risks of production exposure such as tax credit, government or industry programs. Additionally, LG Studios may experience delays and increased costs due to disruptions or events beyond its control and if production incurs substantial budget overruns, LG Studios may have to seek additional financing or fund the overrun itself. LG Studios cannot make assurances regarding the availability of such additional financing on terms acceptable to it, or that it will recoup these costs. Increased costs or budget overruns incurred with respect to a particular film may prevent its completion of release, or may result in a delayed release and the postponement to a potentially less favorable date. This could adversely affect box office performance, and the overall financial success of such film. Any of the foregoing could have a material adverse effect on LG Studios’ business, financial condition, operating results, liquidity and prospects.

LG Studios may incur significant write-offs if its projects do not perform well enough to recoup costs.

LG Studios will be required to amortize capitalized production costs over the expected revenue streams as it recognizes revenue from films or other projects. The amount of production costs that will be amortized each quarter depends on, among other things, how much future revenue LG Studios expects to receive from each project. Unamortized production costs are evaluated for impairment each reporting period on a project-by-project basis when events or changes in circumstances indicate that the fair value of a film is less than its unamortized cost. These events and changes in circumstances include, among others, an adverse change in the expected performance of a film prior to its release, actual costs substantially in excess of budgeted cost for the film, delays or changes in release plans and actual performance subsequent to the film’s release being less than previously expected performance estimates. In any given quarter, if LG Studios lowers its previous forecast with respect to total anticipated revenue from any film or other project or increases its previous forecast of cost of making or distribution of the film, LG Studios may be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if it previously recorded impairment charges for such film or other project. Such impairment charges could adversely impact the business, operating results and financial condition.

Changes in LG Studios’ business strategy, plans for growth or restructuring may increase its costs or otherwise affect its profitability.

As changes in LG Studios’ business environment occur, it may adjust its business strategies to meet these changes, which may include growing a particular area of business or restructuring a particular business or asset. In addition, external events including changing technology, changing consumer patterns, acceptance of its theatrical offerings and changes in macroeconomic conditions may impair the value of its assets. When these occur, LG Studios may incur costs to adjust its business strategy and may need to write down the value of assets. LG Studios may also invest in existing or new businesses. Some of these investments may have negative or low short-term returns and the ultimate prospects of the businesses may be uncertain or may not develop at a rate that supports its level of investment. In any of these events, LG Studios’ costs may increase, it may have significant charges associated with the write-down of assets, or returns on new investments may be lower than prior to the change in strategy, plans for growth or restructuring.

 

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LG Studios’ revenues and results of operations may fluctuate significantly.

LG Studios’ results of operations will depend significantly upon the commercial success of the motion picture, television and other content that it sells, licenses or distributes, which cannot be predicted with certainty. In particular, if one or more motion pictures underperform at the box office in any given period, its revenue and earnings results for that period (and potentially, subsequent periods) may be less than anticipated. LG Studios’ results of operations may also fluctuate due to the timing, mix, number and availability of theatrical motion picture and home entertainment releases, as well as license periods for content. Moreover, low ratings for television programming produced by LG Studios may lead to the cancellation of a program which may result in significant programming impairment charges in a given period, and can negatively affect license fees for the cancelled program in future periods. Other than non-renewals or cancellation of television programs or series that may occur from time to time, Lions Gate Parent is not aware of any current material cancellation of television programming releases or of content that it sells, licenses or distributes. In addition, the comparability of results may be affected by changes in accounting guidance or changes in LG Studios’ ownership of certain assets and businesses. As a result of the factors above, LG Studios’ results of operations may fluctuate and differ from period to period, and therefore, may not be indicative of the results for any future periods or directly comparable to prior reporting periods.

LG Studios’ content licensing arrangements, primarily those relating to the distribution of films in foreign territories, may include minimum guarantee arrangements which, absent such arrangements, could adversely affect our results of operations.

LG Studios generates revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. Certain of such content licensing arrangements, primarily those relating to the distribution of films by third parties in foreign territories, may include a minimum guarantee. Revenue from these minimum guarantee arrangements amounted to approximately $101.3 million, $51.1 million and $29.8 million for the years ended March 31, 2023, 2022 and 2021 respectively, and $100.0 million and $29.6 million for the nine months ended December 31, 2023 and 2022, respectively.

To the extent that receipts generated by such foreign distributor from distribution of the film in the territory exceeds a formula-based threshold, the distributor pays LG Studios an amount in addition to the minimum guarantee (the “overage”). Absent these arrangements, the revenues derived by LG Studios may be determined as a function of a revenue-sharing formulation that calculates the licensee fee payable to LG Studios solely based on the actual performance of the film in the territory. In these situations, content that is not favorably received or underperforms may not achieve the level of revenues that LG Studios would have received from a minimum guarantee arrangement, which could adversely impact the Company’s business, operating results and financial condition.

The Studio Business does not have long-term arrangements with many of its production or co-financing partners.

With respect to the Studio Business, Lions Gate Parent typically does not enter into long-term production contracts with the creative producers of motion picture and television content that it produces, acquires or distributes. Moreover, LG Studios generally will have certain derivative rights that provide it with distribution rights to, for example, prequels, sequels and remakes of certain content it produces, acquires or distributes. There is no guarantee that LG Studios will produce, acquire or distribute future content by any creative producer or co-financing partner, and a failure to do so could adversely affect its business, financial condition, operating results, liquidity and prospects.

 

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The Studio Business relies on a few major retailers and distributors and the loss of any of those could reduce its revenues and operating results.

A small number of retailers and distributors account for a material percentage of the revenues in home entertainment for the Motion Picture segment of the Studio Business. The Studio Business does not have long-term agreements with retailers. In addition, in fiscal 2023, 2022 and 2021, the Studio Business generated approximately 25%, 24% and 11%, respectively, of its revenue from the Starz Business, and in fiscal 2023, 2022 and 2021, the Studio Business generated approximately 11%, 9% and 15%, respectively, of its revenue from Amazon.com, Inc. and its subsidiaries. LG Studios cannot assure you that it will maintain favorable relationships with its retailers and distributors or that they will not be adversely affected by economic conditions, including as a result of global pandemics, wars, such as Russia’s invasion of Ukraine (including sanctions therefrom, though Lions Gate Parent and, to the knowledge of Lions Gate Parent, its directors and executive officers have not been, and are not expected to be, subject to any sanctions related to Russia’s invasion of Ukraine), rising interest rates, inflation or a recession. For additional information, see Note 16 to the combined audited financial statements of the Studio Business in this prospectus. For information regarding charges related to Russia’s invasion of Ukraine included in direct operating expenses for fiscal 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Studio Business of Lions Gate Entertainment Corp.”

A significant portion of the Studio Business’ library revenues comes from a small number of titles.

The Studio Business depends on a limited number of titles in any given fiscal quarter for the majority of the revenues generated by its library. In addition, many of the titles in its library are not presently distributed and generate substantially no revenue. Moreover, its rights to the titles in its library vary; in some cases, the Studio Business only holds the right to distribute titles in certain media and territories for a limited term; in other cases, certain rights may be reserved and/or granted to third parties or otherwise only granted to LG Studios for a limited period. If LG Studios cannot acquire new product and the rights to popular titles through production, distribution agreements, acquisitions, mergers, joint ventures or other strategic alliances, or renew expiring rights to titles generating a significant portion of its revenue on acceptable terms, any such failure could have a material adverse effect on its business, financial condition, operating results, liquidity and prospects. Other than its recent acquisition of eOne, Lions Gate Parent has not entered into any agreements regarding material acquisitions of titles, renewals, business combinations, joint ventures or sales that are pending. Completed material acquisitions have been previously disclosed in the reports of Lions Gate Parent that have been filed under the Exchange Act.

Changes in consumer behavior, as well as evolving technologies and distribution models, may negatively affect LG Studios’ business, financial condition or results of operations.

LG Studios’ success, in part, depends on its ability to anticipate and adapt to shifting content consumption patterns. The ways in which viewers consume content, and technology and business models in its industry, continue to evolve, and new distribution platforms, as well as increased competition from new entrants and emerging technologies, have added to the complexity of maintaining predictable revenues. Developments in technology and new content delivery products and services have also led to an increased amount of video content, as well as changes in consumers’ expectations regarding the availability of video content and their willingness to pay for access to such content. These changes include the increase in the number of advertising-based video on demand services or free, ad-supported streaming linear channels (also known as FAST channels) or increased cord-cutting. In addition, rules governing new technological developments, such as developments in generative artificial intelligence, remain unsettled, and these developments may affect aspects of LG Studios’ business model, including revenue streams for the use of its intellectual property and how LG Studios creates and distributes its content. If LG Studios fails to successfully exploit emerging technologies and effectively anticipate or adapt to emerging competitors, content distribution platforms, changes in consumer behavior and shifting business models, this could have a material adverse effect on its competitive position, business, financial condition and results of operations.

 

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LG Studios expects to face substantial competition in all aspects of its business.

LG Studios will be an independent distributor and producer. Most of the major U.S. studios are part of large diversified corporate groups with a variety of other operations that can provide both the means of distributing their products and stable sources of earnings that may allow them to better offset fluctuations in the financial performance of their motion picture operations and television production operations.

LG Studios faces economic, political, regulatory, and other risks from doing business internationally.

LG Studios has operations and distributes content outside the U.S. and derives revenue from international sources. As a result, its business is subject to certain risks inherent in international business, many of which are beyond its control. These risks may include:

 

   

difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions;

 

   

laws and policies adversely affecting trade, investment and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws;

 

   

sanctions imposed on countries, entities and individuals with whom it conducts business (such as those imposed due to Russia’s invasion of Ukraine);

 

   

the impact of trade disputes;

 

   

anti-corruption laws and regulations such as the Foreign Corrupt Practices Act and the U.K. Bribery Act that impose strict requirements on how LG Studios may conduct its foreign operations and changes in these laws and regulations;

 

   

changes in local regulatory requirements including regulations designed to stimulate local productions, promote and preserve local culture and economic activity (including local content quotas, investment obligations, local ownership requirements, and levies to support local film funds);

 

   

differing degrees of consumer protection, data privacy and cybersecurity laws and changes in these laws;

 

   

differing degrees of employee or labor laws and changes in these laws that may impact our ability to hire and retain foreign employees;

 

   

strikes or other employment actions that may make it difficult to produce and/or localize content;

 

   

censorship requirements that may cause LG Studios to remove or edit popular content, leading to consumer disappointment, brand tarnishment or consumer dissatisfaction;

 

   

inability to adapt LG Studios’ offerings successfully to differing languages, cultural tastes, and preferences in international markets;

 

   

international jurisdictions where laws are less protective of intellectual property and varying attitudes towards the piracy of intellectual property;

 

   

establishing and protecting a new brand identity in competitive markets;

 

   

the instability of foreign economies and governments;

 

   

currency exchange restrictions, export controls and currency devaluation risks in some foreign countries;

 

   

war and acts of terrorism; and

 

   

the spread of communicable diseases, which may impact business in such jurisdictions.

LG Studios’ actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of its business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse business consequences.

 

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LG Studios will be subject to risks associated with possible acquisitions, dispositions, business combinations, or joint ventures.

From time to time, LG Studios may engage in discussions and activities with respect to possible acquisitions, sale of assets, business combinations, joint ventures intended to complement or expand its business or other transactions, such as its acquisition of eOne in December 2023. However, LG Studios may not realize the anticipated benefit from the transactions it pursues; there may be liabilities assumed that it did not discover or that it underestimated in the course of performing its due diligence; the negotiation of the transaction and the integration of the acquired business could require LG Studios to incur significant costs and cause diversion of management’s time and resources; the transaction could result in impairment of goodwill and other intangibles, development write-offs and other related expenses; the transaction may pose challenges in the consolidation and integration of information technology, accounting systems, personnel and operations; and LG Studios may have difficulty managing the combined entity in the short term if it experiences a significant loss of management personnel during the transition period after a significant acquisition. No assurance can be given that expansion, acquisition or other opportunities will be successful, completed on time, or that LG Studios will realize expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits. Any of the foregoing could have a material adverse effect on LG Studios’ business, financial condition, operating results, liquidity and prospects. If LG Studios determines to sell individual properties, libraries or other assets or businesses, it will benefit from the net proceeds realized from such sales. However, LG Studios’ long-term revenue may be affected due to the loss of revenue generating assets, and poor timing of disposals may result in unrealized asset value, all of which may diminish its ability to service its indebtedness and repay its notes and its other indebtedness at maturity. Furthermore, LG Studios’ future growth may be inhibited if the disposed asset contributed in a significant way to the diversification of its business platform.

If Entertainment One Canada Ltd. loses Canadian status, it could lose licenses, incentives and tax credits.

Through the acquisition of eOne, LG Studios indirectly acquired the economic interests in Entertainment One Canada Ltd., a Canadian corporation (“EOCL”). EOCL is able to benefit from a number of licenses, incentive programs and Canadian government tax credits as a result of it being “Canadian controlled” as defined in the Investment Canada Act. LG Studios has taken measures to ensure that EOCL’s Canadian status is maintained. There can be no assurance, however, that EOCL will be able to continue to maintain its Canadian status. The loss of EOCL’s Canadian status could harm LG Studios’ business, including the possible loss of future incentive programs and clawback of funding previously provided to EOCL.

Lions Gate Parent may fail to realize the anticipated benefits of the acquisition of eOne.

Lions Gate Parent may not be able to successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following the eOne acquisition. Lions Gate Parent also may not achieve the anticipated benefits from the eOne acquisition due to a number of factors, including: (a) an inability to integrate or benefit from the acquisition in a profitable manner; (b) unanticipated costs or liabilities associated with the acquisition; (c) the incurrence of acquisition-related costs; (d) the diversion of management’s attention from other business concerns; and (e) the loss of our or the acquired business’ key employees.

LG Studios’ success will depend on attracting and retaining key personnel and artistic talent.

LG Studios’ success will depend upon the continued efforts, abilities and expertise of its executive teams and other key employees, including production, creative and technical personnel, including, in turn, on its ability to identify, attract, hire, train and retain such personnel. LG Studios expects to have employment agreements with top executive officers and production executives but does not expect to have significant “key person” life insurance policies for any employee. Although it is standard in the industry to rely on employment agreements as a method of retaining the services of key employees, these agreements cannot assure LG Studios of the continued services of such employees. In addition, LG Studios will depend on the availability of a number of actors,

 

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writers, directors and producers of third-party production companies who create its original programming. LG Studios cannot assure you that it will be successful in identifying, attracting, hiring, training and retaining such personnel in the future, and LG Studios’ inability to do so could have a material adverse effect on its business, financial condition, operating results, liquidity and prospects.

Global economic turmoil and regional economic conditions could adversely affect LG Studios’ business.

Global economic turmoil resulting from such events as global pandemics, wars, inflation, rising interest rates, bank failures or a recession, may cause a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, levels of intervention from U.S. federal government and other foreign governments, decreased consumer confidence, overall slower economic activity and extreme volatility in credit, equity and fixed income markets. A decrease in economic activity in the U.S. or in other regions of the world in which LG Studios will do business could adversely affect demand for its content, thus reducing its revenues and earnings. A decline in economic conditions could reduce performance of theatrical and home entertainment releases. In addition, an increase in price levels generally could result in a shift in consumer demand away from the entertainment offered, which could also adversely affect LG Studios revenues and, at the same time, increase costs. Moreover, financial institution failures may make it more difficult to finance any future acquisitions, or engage in other financing activities.

LG Studios could be adversely affected by labor disputes, strikes or other union job actions.

The Studio Business is directly or indirectly dependent upon highly specialized union members who are essential to the production of motion pictures and television content including writers, directors, actors and other talent as well as trade employees and others who are subject to collective bargaining agreements. In general, a labor dispute, work stoppage, work slowdown, strike by, or a lockout of, one or more of the unions that provide personnel essential to the production of motion pictures or television content, including a potential strike from The International Alliance of Theatrical Stage Employees, could delay or halt the Studio Business’s ongoing development and/or production activities, or could cause a delay or interruption in release of new motion pictures and television content. Labor disputes may restrict access to content, result in work stoppages, and may result in increased costs and decreased revenue, which could have a material adverse effect on LG Studios’ business, financial condition, operating results, liquidity and prospects.

Business interruptions from circumstances or events out of LG Studios’ control could adversely affect LG Studios’ operations.

The operations of the Studio Business are vulnerable to outages and interruptions due to fire, floods, power loss, telecommunications failures, software or hardware failures, loss of data, security breaches, cyberattacks, personnel misconduct or error, global pandemics, work stoppages and strikes, and similar events beyond its control. LG Studios’ headquarters will be located in Southern California, which is subject to natural disasters such as earthquakes, wildfires and flooding. In the event of a short-term power outage, LG Studios may have uninterrupted power source equipment designed to protect its equipment. A long-term power outage, however, could disrupt its operations.

Although LG Studios may carry business interruption insurance for potential losses (including earthquake-related losses), there can be no assurance that such insurance will be sufficient to compensate for losses that may occur or that such insurance may continue to be available on affordable terms. Any losses or damages incurred by LG Studios could have a material adverse effect on its business, financial condition, operating results, liquidity and prospects.

 

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LG Studios’ business is dependent on the maintenance and protection of its intellectual property and pursuing and defending against intellectual property claims may have a material adverse effect on LG Studios’ business.

LG Studios’ ability to compete depends, in part, upon successful maintenance and protection of its intellectual property. LG Studios will attempt to maintain and protect its proprietary and intellectual property rights to its productions through available copyright and trademark laws, contractual provisions in its agreements with its employees, contractors and production partners that develop intellectual property on its behalf, and licensing and distribution arrangements with reputable international companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries where the Studio Business distributes its products. As a result, it may be possible for unauthorized third parties to copy and distribute LG Studios’ productions or certain portions or applications of its intended productions, which could have a material adverse effect on LG Studios’ business, financial condition, operating results, liquidity and prospects. Moreover, there can be no assurance that LG Studios, content producers or other third parties from whom it has licensed or acquired content, have, in every instance, entered into agreements that contain appropriate protections regarding intellectual property, including non-disclosure, “work made for hire” or valid assignment provisions, with each party who has developed intellectual property on their respective behalf. Litigation may also be necessary to enforce LG Studios’ intellectual property rights, to protect its trade secrets, or to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation, infringement or invalidity claims could result in substantial costs and the diversion of resources and could have a material adverse effect on LG Studios’ business, financial condition, operating results, liquidity and prospects. LG Studios’ more successful and popular film or television products or franchises may experience higher levels of infringing activity, particularly around key release dates. Alleged infringers have claimed and may claim that their products are permitted under fair use or similar doctrines, that they are entitled to compensatory or punitive damages because LG Studios’ efforts to protect its intellectual property rights are illegal or improper, and that LG Studios’ key trademarks or other significant intellectual property are invalid. Such claims, even if meritless, may result in adverse publicity or costly litigation. LG Studios will vigorously defend its copyrights and trademarks from infringing products and activity, which can result in litigation. It may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurance that a favorable final outcome will be obtained in all cases. Additionally, one of the risks of the film and television production business is the possibility that others may claim that LG Studios’ productions and production techniques misappropriate, infringe, or otherwise violate the intellectual property rights of third parties.

Notwithstanding its efforts to obtain all permissions and clearances it deems necessary in relation to the content it creates or distributes, from time to time, LG Studios may be subject to claims and legal proceedings regarding alleged infringement by it of the intellectual property rights (including patents) of third parties. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, require the development of alternative technology or business practices, injunctions against LG Studios, or payments for licenses or damages. These risks may be amplified by the increase in third parties whose sole or primary business is to assert such claims. Regardless of the validity or the success of the assertion of any such claims, LG Studios could incur significant costs and diversion of resources in enforcing its intellectual property rights or in defending against such claims, which could have a material adverse effect on its business, financial condition, operating results, liquidity and prospects.

In addition, LG Studios may, from time to time, lose or cease to control certain of its rights in the intellectual property on which it relies. Pursuant to applicable intellectual property laws, such rights may expire or be transferred to third parties as a result of the operation of copyright reversion and/or termination of transfer rights under applicable laws. Additionally, where LG Studios acquires rights in certain properties or content, it may only acquire such rights for a limited period or subject to other restrictions. Where LG Studios loses intellectual property rights, it may not be able to re-acquire such rights on reasonable terms or at all, including due to material entering the public domain. The loss of (or of control of) such intellectual property rights may adversely impact LG Studios’ ability to prevent others from exploiting content based on such rights.

 

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The Studio Business involves risks of liability claims for content of material, which could adversely affect LG Studios’ business, results of operations and financial condition.

As a distributor of media content, LG Studios may face potential liability for defamation, violation of rights of privacy or publicity or other similar rights, negligence, copyright or trademark infringement, claims related to the adult nature of some of its content, other claims based on the nature and content of the materials distributed or on statements made by personnel or talent regarding or promoting those materials or attributable to its business. These types of claims have been brought, sometimes successfully, against producers and distributors of media content. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on LG Studios’ business, financial condition, operating results, liquidity and prospects.

Piracy of films and television programs could adversely affect LG Studios’ business over time.

Piracy is extensive in many parts of the world and is made easier by the availability of digital copies of content and technological advances allowing conversion of films and television content into digital formats. This trend facilitates the creation, transmission and sharing of high-quality unauthorized copies of motion pictures and television content. The proliferation of unauthorized copies of these products has had and will likely continue to have an adverse effect on the Studio Business, because these products may reduce the revenue it may receive from distribution. In order to contain this problem, LG Studios may have to implement elaborate and costly security and anti-piracy measures, which could result in significant expenses and losses of revenue. LG Studios cannot assure you that even the highest levels of security and anti-piracy measures will prevent piracy.

LG Studios may rely upon “cloud” computing services to operate certain aspects of its service and any disruption of or interference with its use of its “cloud” computing servicer could impact its operations and its business could be adversely impacted.

LG Studios may utilize “cloud” computing services to deliver a distributed computing infrastructure platform for its business operations. LG Studios may architect its software and computer systems so as to utilize data processing, storage capabilities and other services provided by its current “cloud” computing service provider and run its computing via such “cloud” computing service provider. Given this, along with the fact that switching “cloud” computing services to another provider may be difficult, any problems faced by LG Studios’ “cloud” computing provider, including technological or business-related disruptions, as well as cybersecurity threats and regulatory interference, or any unanticipated interference with its current “cloud” service provider could impact LG Studios’ operations and its business could be adversely impacted.

LG Studios’ activities are subject to stringent and evolving obligations which may adversely impact its operations. LG Studios’ actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of its business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.

Data Privacy and Security. In the ordinary course of its business, LG Studios collects, generates, uses, stores, processes, discloses, transmits, shares and transfers (collectively “processing”) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, and third-party data, through its websites and applications and those of third parties. Among other purposes, LG Studios uses this information to engage with users, promote its programming, and monitor the use of its digital platforms. LG Studios’ collection and use of personal data may subject it to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

In the U.S, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal

 

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Trade Commission Act and the Controlling the Assault of Non-Solicited Pornography and Marketing Act), and other similar laws (e.g., wiretapping laws). For example, in the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact LG Studios’ business and ability to provide its products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018 (“CCPA”) allows for civil penalties (up to $7,500 per intentional violation). Similar laws are being considered in several other states, as well as at the federal and local levels. These developments further complicate compliance efforts and increase legal risk and compliance costs for LG Studios and the third parties upon whom LG Studios relies.

Outside the U.S, an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR” and, together with the EU GDPR, “EU GDPR”), the EU Digital Services Act, Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018) and Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) impose strict requirements for processing personal data. For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros (under the EU GDPR) or, 17.5 million pounds sterling (under the UK GDPR), or 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. As another example, in Canada, PIPEDA and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to LG Studios’ operations, as well as the LGPD in Brazil. The LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the GDPR.

Additionally, regulators are increasingly scrutinizing companies that process children’s data. Numerous laws, regulations, and legally-binding codes, such as the Children’s Online Privacy Protection Act (“COPPA”), California’s Age Appropriate Design Code, CCPA, other U.S. state comprehensive privacy laws, GDPR, and the UK Age Appropriate Design Code impose various obligations on companies that process children’s data, including requiring certain consents to process such data and extending certain rights to children and their parents with respect to that data. Some of these obligations have wide ranging applications, including for services that do not intentionally target child users (defined in some circumstances as a user under the age of 18 years old). These laws may be, or in some cases, have already been, subject to legal challenges and changing interpretations, which may further complicate LG Studios’ efforts to comply with these laws.

LG Studios’ may be subject to new laws governing the processing of consumer health data, including by providing for reproductive, sexual orientation, and gender identity privacy rights. For example, Washington’s My Health My Data Act (“MHMD”) broadly defines consumer health data, places restrictions on processing consumer health data (including imposing stringent requirements for consents), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law. Other states are considering and may adopt similar laws.

Additionally, under various privacy laws (such as the Video Privacy Protection Act) and other obligations, LG Studios’ may be required to obtain certain consents to process personal data. Noncompliance with such obligations is increasingly subject to challenges by class action plaintiffs. LG Studios’ inability or failure to obtain such consents could result in adverse consequences.

 

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In the ordinary course of business, LG Studios may transfer personal data from Europe and other jurisdictions to the U.S. or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (“EEA”) and the United Kingdom (“UK”) have significantly restricted the transfer of personal data to the U.S. and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the U.S. in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that LG Studios can satisfy or rely on these measures to lawfully transfer personal data to the U.S.

If there is no lawful manner for LG Studios to transfer personal data from the EEA, the UK or other jurisdictions to the U.S., or if the requirements for a legally-compliant transfer are too onerous, LG Studios could face significant adverse consequences, including the interruption or degradation of its operations, the need to relocate part of or all its business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against processing or transferring of personal data necessary to operate its business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of the EEA for allegedly violating the GDPR’s cross-border data transfer limitations.

LG Studios is also bound by contractual obligations related to data privacy and security, and its efforts to comply with such obligations may not be successful. For example, LG Studios is contractually subject to industry standards adopted by industry groups, such as the Payment Card Industry Data Security Standard (“PCI DSS”). The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access. Noncompliance with PCI-DSS can result in penalties ranging from fines of $5,000 to $100,000 per month by credit card companies, litigation, damage to LG Studios’ reputation, and revenue losses. LG Studios also relies on third parties to process payment card data, who may be subject to PCI DSS, and its business may be negatively affected if these parties are fined or suffer other consequences as a result of PCI DSS noncompliance. Moreover, LG Studios publishes privacy policies, marketing materials and other statements regarding data privacy and security, including as required by applicable laws and regulations. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of LG Studios’ practices, it may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires significant resources and may necessitate changes to LG Studios’ information systems, policies and practices and to those of any third parties upon which it relies.

LG Studios may at times fail (or be perceived to have failed) in efforts to comply with data privacy and security obligations. Moreover, despite its efforts, its personnel or third parties upon whom it relies may fail to comply with such obligations, which could negatively impact LG Studios’ business operations and compliance posture. If LG Studios or the third parties on which it relies fails, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, LG Studios could face significant consequences, including, but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and

 

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similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans or restrictions on processing personal data; or orders to destroy or not use personal data. In particular, plaintiffs have become increasingly active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on LG Studios’ reputation, business, or financial condition, including, but not limited to: loss of customers; interruptions or stoppages in business operations; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize its products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to its business model or operations.

Consumer Protection Laws. The continued growth and development of the market for online commerce may lead to more stringent consumer protection laws both domestically and internationally, which may impose additional burdens on LG Studios. In addition, many states have enacted laws regulating automatically renewing online subscription services. If authorities start taking increased enforcement action related to statutes governing perceived unfair deceptive acts and practices, LG Studios could suffer additional costs, complaints and/or regulatory investigations or fines. Other changes in consumer protection laws and the interpretations thereof, could have a materially adverse effect on LG Studios’ business, financial condition and results of operations.

Levies/Taxes. Governments are increasingly looking to introduce regulations related to media and tax that may apply to LG Studios’ services. For example, some international governments have enacted or are considering enacting laws that impose levies and other financial obligations on media operators located outside their jurisdiction. Other changes in levy or tax laws and the interpretations thereof could have a materially adverse effect on LG Studios’ business, financial condition and results of operations.

Service disruptions or failures of LG Studios’ or its third party service providers’ information systems, data and networks may disrupt its businesses, damage its reputation, expose it to regulatory investigations, actions, litigation, fines and penalties or have a negative impact on its results of operations including but not limited to loss of revenue or profit, loss of customers or sales and other adverse consequences.

In the ordinary course of LG Studios’ business, LG Studios and the third parties on which it relies process proprietary, confidential, and sensitive data, including personal data, intellectual property, and trade secrets (collectively, sensitive information). Threats such as cyberattacks, malicious internet-based activity, and online and offline fraud are becoming more prevalent and are increasingly difficult to detect. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, LG Studios and the third parties upon which it relies may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt LG Studios’ systems and operations, supply chain, and ability to produce, sell and distribute its goods and services.

LG Studios and the third parties upon which it relies are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated by artificial intelligence, and other similar threats. In particular, ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in LG Studios’ operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but LG Studios may be unwilling or unable to make

 

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such payments due to, for example, applicable laws or regulations prohibiting such payments. Further, a partially remote workforce poses increased risks to LG Studios’ information technology systems and data, as certain employees work from home on a full or part-time basis, utilizing network connections outside LG Studios’ premises. Business transactions (such as acquisitions or integrations) could expose LG Studios to additional cybersecurity risks and vulnerabilities, as its systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, LG Studios may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into its information technology environment and security program.

LG Studios relies on third parties to operate critical business systems to process proprietary, confidential or other sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure (for more, see the Risk Factor titled “LG Studios’ may rely upon “cloud’ computing services to operate certain aspects of its service and any disruption of or interference with its use of its “cloud” computing servicer could impact its operations and its business could be adversely impacted.), data center facilities, encryption and authentication technology, employee email servers, content delivery systems, and other functions. LG Studios’ ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If these third parties experience a security incident or other interruption, LG Studios could experience adverse consequences. While LG Studios may be entitled to damages if these third parties fail to satisfy their privacy or security-related obligations to it, any award may be insufficient to cover LG Studios’ damages, or LG Studios may be unable to recover such award. Similarly, supply-chain attacks have increased in frequency and severity, and LG Studios cannot guarantee that third parties and infrastructure in its supply chain or its third-party partners’ supply chains have not been compromised.

LG Studios takes steps to detect, mitigate and remediate vulnerabilities in its information systems (such as its hardware or software) and those of the third parties upon which LG Studios relies, but it may not be able to detect and remediate (or have its third party service providers remediate) all such vulnerabilities on a timely basis or at all. Further, LG Studios may experience delays in developing and deploying remedial measures and patches designed to address any such identified vulnerabilities. If not remediated expeditiously, vulnerabilities could be exploited and result in a security incident.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to LG Studios’ sensitive information. A security incident or other interruption could disrupt LG Studios’ ability (and that of third parties upon whom it relies) to provide its services. LG Studios’ may expend significant resources or modify its business activities to try to protect against security incidents. Certain data privacy and security obligations may require LG Studios to implement and maintain specific industry-standard or reasonable security measures to protect its information technology systems and sensitive information. While LG Studios has implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

Applicable data privacy and security obligations may require LG Studios to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If LG Studios (or a third party upon whom it relies) experiences a security incident or is perceived to have experienced a security incident, LG Studios may experience adverse consequences, such as: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information; litigation; indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in its operations; financial loss; and other similar harms. Security incidents and attendant consequences may cause customers to stop using LG Studios’ services, deter new customers from using LG Studios’ services, and negatively impact LG Studios’ ability to grow and operate its business. LG Studios’ contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in its contracts are

 

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sufficient to protect it from liabilities, damages, or claims related to its data privacy and security obligations. LG Studios cannot be sure that its insurance coverage will be adequate or sufficient to protect it from or to mitigate liabilities arising out of its privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about LG Studios from public sources, data brokers, or other means that reveals competitively sensitive details about its organization and could be used to undermine its competitive advantage or market position.

LG Studios may incur debt obligations that could adversely affect its business and profitability and its ability to meet other obligations.

LG Studios may complete one or more financing transactions on or prior to the completion of the Business Combination. As a result of such transactions, LG Studios anticipates having approximately $1,531.0 million of corporate intercompany indebtedness upon completion of the Business Combination pursuant to an intercompany note with Lions Gate Parent or one or more of its subsidiaries. Upon completion of the Business Combination, LG Studios and certain of its subsidiaries will also continue to provide a guarantee of Lions Gate Parent’s obligations under (i) the Lions Gate Parent Credit Agreement and (ii) the Lions Gate Parent Indenture and 5.500% senior notes due 2029 issued thereunder. LG Studios and certain of its subsidiaries will also continue to grant liens on and pledge collateral in favor of the collateral agent on behalf of the secured parties under the Lions Gate Parent Credit Agreement. LG Studios may also incur additional indebtedness in the future. As of December 31, 2023 and March 31, 2023, the Studio Business has corporate debt of approximately $1,604.4 million and $1,259.9 million, respectively, and film related obligations of approximately $1,821.5 million and $1,951.5 million, respectively. The Studio Business’ intercompany note shall provide for revolving credit commitments of $1.10 billion. The Studio Business’s debt service obligations (principal and interest) on its corporate debt and film related obligations outstanding as of December 31, 2023 over the next twelve months is estimated to be approximately $1,428.4 million. This amount is based on the applicable SOFR rate as of December 31, 2023, and is net of payments and receipts from the Studio Business’s interest rate swaps under the Studio Business’ intercompany note and excludes amounts that may be required for future borrowings under the revolving credit line portion of the Studio Business’ intercompany note which had an outstanding balance of $375.0 million as of December 31, 2023. The debt service amounts exclude amounts due at maturity associated with the Studio Business’ intercompany note including amounts reflective of Lions Gate Parent’s Term Loan A, which may be accelerated to December 2024 if amounts in excess of $250 million remain outstanding under Lions Gate Parent’s Term Loan B and have not been repaid, refinanced or extended to have a maturity on or after July 6, 2026. Interest paid on the weighted average borrowings under the line of credit of approximately $281.7 million amounted to $22.1 million during the nine months ended December 31, 2023.

This significant amount of debt could potentially have important consequences to LG Studios and its debt and equity investors, including:

 

   

requiring a substantial portion of its cash flow from operations to make interest payments;

 

   

making it more difficult to satisfy debt service and other obligations;

 

   

increasing the risk of a future credit ratings downgrade of its debt, which could increase future debt costs and limit the future availability of debt financing;

 

   

increasing its vulnerability to general adverse economic and industry conditions;

 

   

reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow its business;

 

   

limiting LG Studios’ flexibility in planning for, or reacting to, changes in its business and the industry;

 

   

placing LG Studios at a competitive disadvantage relative to its competitors that may not be as highly leveraged with debt; and

 

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limiting LG Studios’ ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase Pubco Common Shares.

To the extent that LG Studios incurs additional indebtedness, the foregoing risks could increase. In addition, LG Studios’ actual cash requirements in the future may be greater than expected. Its cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and LG Studios may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance its debt. For more information, see “StudioCo Relationships and Related Party Transactions – Intercompany Financing Arrangement.”

The terms of the Lions Gate Parent Credit Agreement and the Lions Gate Parent Indenture restrict LG Studios’ current and future operations, particularly LG Studios’ ability to respond to changes or to take certain actions.

Upon completion of the Business Combination, LG Studios will remain subject to the covenants contained in the Lions Gate Parent Credit Agreement and Lions Gate Parent Indenture. The Lions Gate Parent Credit Agreement and the Lions Gate Parent Indenture contain a number of restrictive covenants that impose significant operating and financial restrictions on LG Studios and limit LG Studios’ ability to engage in acts that may be in LG Studios’ long-term best interest, including restrictions on LG Studios’ ability to: incur, assume or guarantee additional indebtedness; issue certain disqualified stock; pay dividends or distributions or redeem or repurchase capital stock; prepay, redeem or repurchase debt that is junior in right of payment to the debt under the Lions Gate Parent Credit Agreement and the notes under the Lions Gate Parent Indenture; make loans or investments; incur liens; restrict dividends, loans or asset transfers from Lions Gate Parent restricted subsidiaries; sell or otherwise dispose of assets, including capital stock of subsidiaries and sale/leaseback transactions; consolidate or merge with or into, or sell substantially all assets to, another person; enter into transactions with affiliates; and enter into new lines of business.

In addition, the Lions Gate Parent Credit Agreement requires Lions Gate Parent to maintain specified financial ratios, tested quarterly. Lions Gate Parent’s ability to meet those financial ratios can be affected by events beyond LG Studios’ control, including the effects on Lions Gate Parent’s or LG Studios’ business from global pandemics and related government actions and consumer behavior; as such, Lions Gate Parent may be unable to meet such financial ratios.

A breach of the covenants under the Lions Gate Parent Credit Agreement or the Lions Gate Parent Indenture, or nonpayment of any principal or interest due thereunder, could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Lions Gate Parent Credit Agreement would permit the lenders under the Lions Gate Parent revolving facility to which LG Studios will have access pursuant to the intercompany note to terminate all commitments to extend further credit thereunder. Furthermore, if Lions Gate Parent were unable to repay the amounts due and payable under the Lions Gate Parent Credit Agreement, the lenders thereof could proceed against the collateral granted to them to secure the credit facilities outstanding under the Lions Gate Parent Credit Agreement. In the event Lions Gate Parent’s lenders or noteholders accelerate the repayment of the borrowings outstanding under the Lions Gate Parent Credit Agreement or Lions Gate Parent Indenture, Lions Gate Parent and its subsidiaries including LG Studios and its subsidiaries may not have sufficient assets to repay that indebtedness.

The U.S. Internal Revenue Service may not agree that Pubco should be treated as a non-U.S. corporation for U.S. federal tax purposes and may not agree that its U.S. affiliates should not be subject to certain adverse U.S. federal income tax rules.

Under current U.S. federal tax law, a corporation is generally considered for U.S. federal tax purposes to be a tax resident in the jurisdiction of its organization or incorporation. Because Pubco will be incorporated outside of the

 

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U.S., it would generally be classified as a non-U.S. corporation (and, therefore, a non-U.S. tax resident) under these rules. However, Section 7874 of the Code (“Section 7874”) provides an exception to this general rule under which a non-U.S. incorporated entity may, in certain circumstances, be treated as a U.S. corporation (or surrogate foreign corporation) for U.S. federal tax purposes if it acquires a domestic entity (referred to as a “domestic entity acquisition”), and after the domestic entity acquisition, 80% or more (by vote or value) of the non-U.S. incorporated entity’s stock (60% or more for purposes of a surrogate foreign corporation determination) is held by former shareholders of the domestic entity by reason of holding stock in the domestic entity. This exception generally does not apply to situations in which, prior to the domestic entity acquisition, 80% or more (by vote and value) of the stock of the domestic entity was held directly or indirectly by a parent corporation (referred to as the “common parent”), and, after the domestic entity acquisition, the same common parent holds 80% or more (by vote and value) of the stock of the non-U.S. incorporated entity (referred to as the “internal group restructuring exception”). The internal group restructuring exception is preserved notwithstanding the common parent’s related transfer of the non-U.S. incorporated entity stock to its shareholders.

There is limited guidance regarding the application of Section 7874, including the application of the rules to the facts as they may exist at the time of the closing of the Business Combination. If Pubco were to be treated as a U.S. corporation for federal tax purposes, it could be subject to substantially greater U.S. tax liability than currently contemplated as a non-U.S. corporation. In addition, non-U.S. shareholders of Pubco would be subject to U.S. withholding tax on the gross amount of any dividends paid by Pubco to such shareholders (subject to an exemption or reduced rate available under an applicable tax treaty). Alternatively, if Pubco were to be treated as a surrogate foreign corporation for U.S. federal tax purposes, it and its U.S. affiliates (including the U.S. affiliates historically owned by it) may, in some circumstances, be subject to certain adverse U.S. federal income tax rules (which, among other things, could limit its ability to utilize certain U.S. tax attributes to offset U.S. taxable income or to offset the gain resulting from certain transactions).

Future changes to U.S. and non-U.S. tax laws could adversely affect Pubco.

The U.S. Congress, the Organisation for Economic Co-operation and Development (“OECD”) and other government agencies in jurisdictions where Pubco and its affiliates will conduct business have had an extended focus on issues related to the taxation of multinational corporations. For the past several years, the primary focus has been in the area of “base erosion and profit shifting,” including situations where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As part of its so-called Base Erosion and Profit Shifting (“BEPS”) project, OECD and the G-20 developed changes to numerous long-standing international tax principles. More recently, countries are increasingly seeking ways to tax what is sometimes referred to as the digitalized economy. For example, in response to the increasing globalization and digitalization of trade and business operations, OECD is working on a proposal as an extension of its BEPS project to establish a global minimum corporate taxation rate. The rules are designed to ensure that large multinational groups pay corporate income taxes at the minimum rate of 15% in the countries where they operate. The goal is for OECD members to enact domestic legislation implementing these rules effective beginning 2024.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The U.S. has enacted significant tax reform, and certain provisions of the law may adversely affect Pubco. Many countries in the European Union, as well as a number of other countries and organizations such as OECD, are increasingly scrutinizing the tax positions of companies and actively considering changes to existing tax laws that, if enacted, could increase Pubco’s tax obligations in countries where it does business. For example, the United Kingdom increased its corporate tax rate from 19% to 25%, starting in April 2023. There can be no assurance that Canadian federal income tax laws, the judicial interpretation thereof, or the administrative policies and assessing practices of the Canada Revenue Agency will not be changed in a manner that adversely affects Pubco or the holders of Pubco common stock. If U.S. or other tax authorities change applicable tax laws, Pubco’s overall taxes could increase, and Pubco’s business, financial condition or results of operations may be adversely impacted.

 

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Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible.

Original programming requires substantial financial commitment, which can occasionally be offset by foreign, state or local tax incentives. However, there is a risk that the tax incentives will not remain available for the duration of a series. If tax incentives are no longer available or reduced substantially, it may result in increased costs for it to complete the production, or make the production of additional seasons more expensive. If Pubco is unable to produce original programming content on a cost-effective basis, its business, financial condition and results of operations would be materially adversely affected.

Pubco’s tax rate is uncertain and may vary from expectations.

There is no assurance that Pubco will be able to maintain any particular worldwide effective corporate tax rate because of uncertainty regarding the tax policies in the jurisdictions in which it and its affiliates operate. Pubco’s actual effective tax rate may vary from its expectations, and such variance may be material. Additionally, tax laws or their implementation and applicable tax authority practices in any particular jurisdiction could change in the future, possibly on a retroactive basis, and any such change could have an adverse impact on Pubco and its affiliates.

Legislative or other governmental action in the U.S. could adversely affect Pubco’s business.

Legislative action may be taken by the U.S. Congress that, if ultimately enacted, could limit the availability of tax benefits or deductions that Pubco expects to claim, override tax treaties upon which it expects to rely, or otherwise increase the taxes that the U.S. imposes on Pubco’s worldwide operations. Such changes could materially adversely affect Pubco’s effective tax rate and/or require it to take further action, at potentially significant expense, to seek to preserve its effective tax rate. In addition, if proposals were enacted that had the effect of limiting Pubco’s ability as a Canadian company to take advantage of tax treaties with the U.S., it could incur additional tax expense and/or otherwise incur business detriment.

Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect Pubco’s effective tax rates.

Pubco is subject to income taxes in Canada, the U.S. and other tax jurisdictions. It also conducts business and financing activities between its entities in various jurisdictions and it is subject to complex transfer pricing regulations in the countries in which it operates. Although uniform transfer pricing standards are emerging in many of the countries in which it operates, there is still a relatively high degree of uncertainty and inherent subjectivity in complying with these rules. In addition, due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. Pubco’s future effective tax rates could be affected by changes in tax laws or regulations or the interpretation thereof (including those affecting the allocation of profits and expenses to differing jurisdictions), by changes in the amount of revenue or earnings that it derives from international sources in countries with high or low statutory tax rates, by changes in the valuation of its deferred tax assets and liabilities, by changes in the expected timing and amount of the release of any tax valuation allowance, or by the tax effects of stock-based compensation. Unanticipated changes in its effective tax rates could affect its future results of operations. Further, Pubco may be subject to examination of its income tax returns by federal, state, and foreign tax jurisdictions. Pubco regularly assesses the likelihood of outcomes resulting from possible examinations to determine the adequacy of its provision for income taxes. In making such assessments, it exercises judgment in estimating its provision for income taxes. While Pubco believes its estimates are reasonable, it cannot assure you that final determinations from any examinations will not be materially different from those reflected in its historical income tax provisions and accruals. Any adverse outcome from any examinations may have an adverse effect on its business and operating results, which could cause the market price of its securities to decline.

 

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If Pubco is a “passive foreign investment company,” or “PFIC,” U.S. Holders of Offering Shares may suffer adverse U.S. federal income tax consequences.

If Pubco is a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined below in the section entitled “Material U.S. Federal Income Tax Considerations for U.S. Holders”), the U.S. Holder may be subject to adverse U.S. federal income tax consequences with respect to the ownership and disposition of Offering Shares, and may be subject to additional reporting requirements.

Because the timing of the Business Combination is uncertain and PFIC status is based on income, assets and activities for the entire taxable year and will be determined based on the assets and activities of the combined business, it is not possible to determine Pubco’s PFIC status until after the close of the current taxable year. In addition, the determination of PFIC status is fundamentally factual in nature and depends on the application of complex U.S. federal income tax rules that are subject to differing interpretations. Accordingly, there can be no assurance that Pubco will not be treated as a PFIC for the current taxable year or any future taxable year. In addition, the U.S. counsel to Pubco expresses no opinion with respect to the PFIC status of Pubco for any taxable year.

If a U.S. Holder holds (is deemed to hold) Offering Shares while Pubco (or any of its successors) is a PFIC, unless the U.S. Holder makes certain elections, Pubco will continue to be treated as a PFIC with respect to such U.S. Holder during subsequent years, whether or not Pubco is treated as a PFIC in those years.

U.S. Holders are strongly urged to consult with their own tax advisors to determine the application of the PFIC rules to them in their particular circumstances and any resulting tax consequences. Please see the subsection entitled “Material U.S. Federal Income Tax Considerations for U.S. Holders—Passive Foreign Investment Company Considerations” for a more detailed discussion with respect to the PFIC status of Pubco and the resulting tax consequences to U.S. Holders.

Risks Related to Ownership of Pubco’s Securities

Pubco cannot be certain that an active trading market for its common shares will develop or be sustained after the Business Combination, and following the completion of the Business Combination, its share price may fluctuate significantly as a result of numerous factors beyond Pubco’s control.

While the securities of Lions Gate Parent are publicly traded, a public market for Pubco Common Shares does not currently exist. Pubco anticipates that trading of its common shares will begin on the first trading day after the Closing. However, Pubco cannot guarantee that an active trading market for its common shares will develop or be sustained after the Business Combination, nor can Pubco predict the prices at which its common shares may trade after the Business Combination.

The market price of Pubco Common Shares may decline or fluctuate significantly due to a number of factors, many of which may be beyond Pubco’s control, including:

 

   

actual or anticipated fluctuations in Pubco’s operating results;

 

   

potential loss of revenue from the Studio Business;

 

   

potential loss of revenue from the Starz Business;

 

   

the operating and stock price performance of comparable companies;

 

   

changes in the Pubco Board or management;

 

   

changes in Pubco’s capital structure, such as future issuances of debt or equity securities;

 

   

changes in reputation concerning the content Pubco offers;

 

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labor disputes, strikes or work stoppages that may impact Pubco, Pubco’s partners, suppliers, etc.;

 

   

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

 

   

fluctuation of interest rates, exchange rates, taxes, inflationary pressure;

 

   

changes in the regulatory and legal environment under which Pubco operates; and

 

   

other events or factors, including those resulting from pandemics or other public health crises, war, incidents of terrorism or responses to these events.

Over the past several years, the stock market has experienced extreme price and volume fluctuations and companies have been experiencing volatility in the market price of their securities which are unrelated or disproportionate to their operating results. Shareholders have instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against Pubco could result in substantial costs, divert management’s attention and resources and harm its business, financial condition and results of operations.

Pubco does not expect to pay any cash dividends for the foreseeable future.

Pubco currently intends to retain future earnings to finance and grow its business. As a result, Pubco does not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by Pubco will be made in the sole discretion of the Pubco Board from time to time in accordance with applicable law. There can be no assurance that Pubco will have sufficient surplus under applicable law to be able to pay any dividends at any time in the future. This may result from extraordinary cash expenses, actual costs exceeding contemplated costs, funding of capital expenditures or increases in reserves. If Pubco does not pay dividends, the price of Pubco Common Shares that you receive in the Business Combination must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of Pubco Common Shares in order to generate cash flow from your investment.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about Pubco’s business, Pubco’s share price and trading volume could decline.

The trading market for Pubco Common Shares will depend in part on the research and reports that securities or industry analysts publish about it or its business. Pubco does not currently have and may never obtain separate research coverage for its common shares. If there is no research coverage, Pubco Common Shares may be negatively impacted. If Pubco obtains research coverage for its common shares and if one or more of the analysts downgrades Pubco Common Shares or publishes unfavorable research about Pubco’s business, its share price may decline. If one or more of the analysts cease coverage of Pubco Common Shares or fail to publish reports on it regularly, demand for Pubco Common Shares could decrease, which could cause the price or trading volume of Pubco Common Shares to decline.

Upon consummation of the Business Combination, the rights and obligations of a Pubco shareholder will be governed by British Columbia law and may differ from the rights and obligations of shareholders of companies organized under the laws of other jurisdictions.

Like Lions Gate Parent, in connection with the Business Combination, Pubco will be incorporated and exist under the laws of British Columbia. Accordingly, its corporate structure as well as the rights and obligations of the holders of Pubco Common Shares may be different from the rights and obligations of shareholders of companies incorporated or organized under the laws of other jurisdictions and may be less favorable to the rights of holders of SEAC Class A Ordinary Shares arising under Cayman Islands law and the SEAC Articles. For a more detailed description of the rights of holders of Pubco Common Shares and how they may differ from the rights of holders of SEAC Class A Ordinary Shares, please see the section entitled “Comparison of Corporate Governance and Shareholder Rights.” The form of the Pubco Closing Articles is attached as Annex C to the Form S-4/A, and you are urged to read it.

 

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Future sales of shares by the Lionsgate Holders could cause the price of Pubco Common Shares to drop significantly.

Lionsgate Holders will have a controlling financial interest in Pubco and will have at least 82.5% (currently expected to be 85.7% under the No Redemption Scenario and 87.3% under the Maximum Redemption Scenario) of the voting interest of Pubco upon the Closing. If the Lionsgate Holders sell or indicate an intention to sell substantial amounts of their Pubco Common Shares in the public market, the trading price of the Pubco Common Shares could decline.

Although the Lionsgate Holders and the SEAC Holders, including the Sponsor, will be subject to restrictions regarding the transfer of shares of Pubco Common Shares held by them following the Business Combination, as described elsewhere in this prospectus, these shares may be sold after the expiration of their respective lock-ups. Pubco intends to file one or more registration statements prior to or shortly after the closing of the Business Combination to provide for the resale of such shares from time to time. As restrictions on resale end and the registration statements are available for use, the market price of Pubco Common Shares could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

Canadian takeover laws may discourage takeover offers being made for Pubco or may discourage the acquisition of large numbers of Pubco Common Shares.

Each of Lions Gate Parent, Studio HoldCo and StudioCo is incorporated in the Province of British Columbia and is subject to the takeover laws of Canada and upon consummation of the Business Combination, Pubco will be subject to the Canadian take-over bid regime pursuant to applicable Canadian securities laws. In general, a take-over bid is an offer to acquire voting or equity securities of a class made to persons in a Canadian jurisdiction where the securities subject to the bid, together with securities beneficially owned, or over which control or direction is exercised, by a bidder, its affiliates and joint actors, constitute 20% or more of the outstanding securities of that class of securities. Subject to the availability of an exemption, take-over bids in Canada are subject to prescribed rules that govern the conduct of a bid by requiring a bidder to comply with detailed disclosure obligations and procedural requirements. Among other things, a take-over bid must be made to all holders of the class of voting or equity securities being purchased; a bid is required to remain open for a minimum of 105 days subject to certain limited exceptions; a bid is subject to a mandatory, non-waivable minimum tender requirement of more than 50% of the outstanding securities of the class that are subject to the bid, excluding securities beneficially owned, or over which control or direction is exercised, by a bidder, its affiliates and joint actors; and following the satisfaction of the minimum tender requirement towards satisfaction or waiver of all other terms and conditions, a bid is required to be extended for at least an additional 10-day period. There are a limited number of exemptions from the formal take-over bid requirements. In general, certain of these exemptions include the following: (i) the normal course purchase exemption permits the holder of more than 20% of a class of equity or voting securities to purchase up to an additional 5% of the outstanding securities in a 12-month period (when aggregated with all other purchases in that period), provided there must be a published market and the purchaser must pay not more than the “market price” of the securities (as defined) plus reasonable brokerage fees or commissions actually paid; (ii) the private agreement exemption exempts private agreement purchases that result in the purchaser exceeding the 20% take-over bid threshold, provided the agreement must be made with not more than five sellers and the sellers may not receive more than 115% of the “market price” of the securities (as defined); and (iii) the foreign take-over bid exemption exempts a bid from the formal take-over bid requirements if, among other things, less than 10% of the outstanding securities of the class are held by Canadian residents and the published market on which the greatest volume of trading in securities of the class occurred in the 12 months prior to the bid was not in Canada.

 

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Pubco Common Shares are subject to Canadian insolvency laws which are substantially different from Cayman Islands insolvency laws and may offer less protections to Pubco Shareholders compared to Cayman Islands insolvency laws.

As a public company incorporated under the laws of the Province of British Columbia, Pubco will be subject to Canadian insolvency laws and may also be subject to the insolvency laws of other jurisdictions in which Pubco will conduct business or hold assets. These laws may apply where any insolvency proceedings or procedures are to be initiated against or by Pubco. Canadian insolvency laws may offer Pubco Shareholders less protection than they would have had under Cayman Islands insolvency laws and it may be more difficult (or even impossible) for shareholders to recover the amount they could expect to recover in a liquidation under Cayman Islands insolvency laws.

 

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USE OF PROCEEDS

All of Pubco Common Shares offered by the Selling Shareholders pursuant to this prospectus will be sold by the Selling Shareholders for their respective accounts. We will not receive any of the proceeds from these sales.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information presents the combination of the financial information of LG Studios and SEAC adjusted to give effect to the Business Combination, the acquisition of eOne and other transactions (together with the Business Combination and the acquisition of eOne, the “Transactions”). The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 combines the historical balance sheets of LG Studios and SEAC on a pro forma basis as if the Transactions had been consummated on December 31, 2023. The unaudited pro forma condensed combined statements of operations for the nine months ended December 31, 2023 and year ended March 31, 2023 combines the historical statements of operations of LG Studios, eOne and SEAC for such periods on a pro forma basis as if the Transactions had been consummated on April 1, 2022, the beginning of the earliest period presented. LG Studios’ fiscal year ends on March 31, eOne’s fiscal year ends on the last Sunday in December and SEAC’s fiscal year ends on December 31. The pro forma condensed combined financial information is presented on the basis of LG Studios’ fiscal year and combines the historical results of the fiscal periods of LG Studios, eOne and SEAC.

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and is not necessarily indicative of the financial position and operating results that would have been achieved had the Transactions occurred on the dates indicated. The unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of Pubco following the completion of the Transactions and may not be useful in predicting the future financial condition and results of operations of Pubco following the Closing. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected in this prospectus due to a variety of factors. Assumptions and estimates underlying the unaudited pro forma adjustments included in the unaudited pro forma condensed combined financial information are described in the accompanying notes. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date on which this unaudited pro forma condensed combined financial information is prepared and are subject to change as additional information becomes available and analyses are performed.

The unaudited pro forma condensed combined financial information was derived from and should be read together with the accompanying notes to the unaudited pro forma condensed combined financial information, financial statements of LG Studios, eOne and SEAC included in this prospectus, the sections titled “LG Studios’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “SEAC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other information relating to LG Studios, eOne and SEAC contained in this prospectus, including the Business Combination Agreement, as amended, and the description of certain terms thereof set forth in the section titled “The Business Combination.”

Description of the Business Combination

On December 22, 2023, SEAC, New SEAC, MergerCo, New BC Sub, Lions Gate Parent, Studio HoldCo and StudioCo entered into the Business Combination Agreement, pursuant to which LG Studios will be combined with SEAC through a series of transactions, including an amalgamation of StudioCo and New SEAC under a Canadian plan of arrangement, resulting in the formation of a new, standalone publicly-traded entity and successor to New SEAC, Pubco, with Lions Gate Parent having a controlling financial interest.

Concurrently with the execution of the Business Combination Agreement, SEAC, New SEAC and Lions Gate Parent entered into Subscription Agreements with the PIPE Investors pursuant to which the PIPE Investors have agreed, subject to the terms and conditions set forth therein, to subscribe for and purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 18,172,378 Pubco Common Shares

 

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(the “Original PIPE Shares”), at a purchase price of $9.63 per share, for an aggregate cash amount of $175.0 million. On April 11, 2024, SEAC, New SEAC and Lions Gate Parent entered into an additional Subscription Agreement with an additional PIPE Investor pursuant to which such PIPE Investor has agreed, subject to the terms and conditions set forth therein, to subscribe for and purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 4,918,839 Pubco Common Shares (the “Additional PIPE Shares” and together with the Original PIPE Shares, the “PIPE Shares”), at a purchase price of $10.165 per share, for an aggregate cash amount of $50.0 million. Pursuant to the Subscription Agreements, certain of the PIPE Investors may elect to offset its total commitments under its Subscription Agreement (the “Reduction Right”), on a one-for-one basis, up to the total amount of PIPE Shares subscribed thereunder, to the extent the PIPE Investors (i) purchases SEAC Class A Ordinary Shares in open market transactions at a price of less than the Closing redemption price per share prior to the record date established for voting at the SEAC Shareholders’ Meeting (“Open-Market Purchase Shares”), but only if the PIPE Investor agrees with respect to such Open-Market Purchase Shares (A) not sell or transfer any such Open-Market Purchase Shares prior to the Closing, (B) not vote any such Open-Market Purchase Shares in favor of approving the proposed transactions and instead submits a proxy abstaining from voting thereon, (C) to the extent such investor has the right to have all or some of its Open-Market Purchase Shares redeemed for cash in connection with the Closing, not exercise any such redemption rights; and (ii) beneficially owned any SEAC Class A Ordinary Shares as of the date of its Subscription Agreement (the “Currently Owned Shares”), but only if the PIPE Investor agrees, with respect to such Currently Owned Shares, to (A) not sell or transfer any such Currently Owned Shares prior to the Closing, (B) vote all of its Currently Owned Shares in favor of approving the proposed transactions, and (C) not exercise any such redemption rights. A PIPE Investor that exercises Reduction Rights in accordance with the foregoing will be entitled to purchase from SEAC 0.1111 newly issued SEAC Class A Ordinary Shares, at a purchase price of $0.0001 per share, for every SEAC Class A Ordinary Share for which it exercises its Reduction Right which shares will be issued by SEAC prior to the SEAC Merger (as defined in the Business Combination Agreement).

On April 11, 2024, SEAC, New SEAC, MergerCo, New BC Sub, Lions Gate Parent, Studio HoldCo and StudioCo entered into Amendment No.1 to the Business Combination Agreement, pursuant to which, among other things, (i) the Aggregate Transaction Proceeds required as a condition to Lions Gate Parent’s, Studio HoldCo’s and StudioCo’s obligations to consummate the Business Combination was amended to be no less than $350.0 million and no greater than $409,500,000, with a minimum of $125.0 million (as adjusted in accordance with the Business Combination Agreement, as amended) required to be in the Trust Account and (ii) the definition of SEAC Shareholder Consideration was amended such that holders of SEAC Class A Ordinary Shares receive only PubCo Common Shares and no cash consideration upon completion of the Business Combination.

The Business Combination Agreement, as amended, provides that, among other things, one business day prior to the Closing:

 

   

Sponsor Securities Repurchase: each SEAC Class B Ordinary Share (and each then issued and outstanding SEAC Class A Ordinary Share that was formerly a SEAC Class B Ordinary Share, if any (the “Former SEAC Founder Shares”)) held by the SEAC Sponsor or any of its affiliates or permitted transferees in excess of 1,800,000 SEAC Class B Ordinary Shares (such 1,800,000 number calculated by including Former SEAC Founder Shares (if any)), and excluding 210,000 SEAC Class B Ordinary Shares that will have been transferred to SEAC’s independent directors and advisors, will be repurchased by SEAC in exchange for an aggregate of $1.00 and options to receive an additional 2,200,000 SEAC Class A Ordinary Shares, subject to the terms and conditions of the Sponsor Option Agreement;

 

   

Class B Conversion: each of the remaining 2,010,000 SEAC Class B Ordinary Shares (such 2,010,000 number calculated by including Former SEAC Founder Shares (if any)), consisting of the 1,800,000 and 210,000 of SEAC Class B Ordinary Shares and Former SEAC Founder Shares (if any) held by the SEAC Sponsor and the independent directors and advisors, respectively, will automatically convert into one SEAC Class A Ordinary Share, with any SEAC Class B Ordinary Shares and Former SEAC Founder Shares that collectively exceed 2,010,000 and that remain (if any) being cancelled for no consideration pursuant to a surrender letter;

 

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as a result of the SEAC Merger, each of the then issued and outstanding SEAC Class A Ordinary Shares, will be exchanged for one New SEAC Class A Ordinary Share;

 

   

SEAC Public Warrant Exchange: the SEAC Public Warrant Exchange will be effected, whereby each of the then issued and outstanding whole SEAC Public Warrants will be automatically exchanged for $0.50 in cash pursuant to the SEAC Warrant Agreement Amendment; and

 

   

SEAC Private Placement Warrant Forfeiture: all of the issued and outstanding private placement warrants will be forfeited and cancelled for no consideration.

On the Closing Date, through a series of transactions further described in the section titled “The Business Combination—Conversion of Securities,” all of the then-issued and outstanding New SEAC Class A Ordinary Shares will ultimately be converted on a one-to-one basis into SEAC Amalco Common Shares, with SEAC Amalco being the successor to New SEAC.

Pursuant to the StudioCo Amalgamation, on the Closing Date each then-issued and outstanding SEAC Amalco Common Share will be cancelled in exchange for one Pubco Common Share and the SEAC Sponsor’s option under the Sponsor Option Agreement shall convert to an option to receive Pubco Common Shares upon the same terms and conditions as in the Sponsor Option Agreement, and each then issued and outstanding common share, without par value, of StudioCo shall be cancelled in exchange for a number of Pubco Common Shares equal to the StudioCo Issuance Equity Value, as defined in the Business Combination Agreement, divided by the Closing Share Price.

As promptly as practicable following the StudioCo Amalgamation, Pubco shall cause its applicable subsidiaries to transfer the aggregate transaction proceeds less amounts payable pursuant to the SEAC Public Warrant Exchange and SEAC transaction expenses, (the “Post-Arrangement Repayment Amount”) in cash to Lions Gate Parent in partial repayment of intercompany financing arrangements between subsidiaries of Lions Gate Parent and subsidiaries of StudioCo. The Post-Arrangement Repayment Amount will not be less than $316.5 million.

Pursuant to the Business Combination Agreement, the aggregate transaction proceeds, before the payment of transaction expenses or any amounts payable pursuant to the SEAC Public Warrant Exchange, are required to be at least equal to $350.0 million, with at least $125.0 million being held in the Trust Account.

For more information about the Business Combination, please see the section titled “The Business Combination.” A copy of the Business Combination Agreement and Amendment to the Business Combination Agreement is attached to the Form S-4/A as Annexes A-1 and A-2.

Accounting Treatment of the Business Combination and Related Transactions

The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with GAAP, whereby SEAC is treated as the acquired company and LG Studios is treated as the acquirer. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of LG Studios issuing stock for the net assets of SEAC, accompanied by a recapitalization. The net assets of SEAC will be stated at fair value, which approximates their historical cost, with no goodwill or other intangible assets recorded. Subsequently, results of operations presented for the periods prior to the Business Combination will be for those of LG Studios.

LG Studios has been determined to be the accounting acquirer in the Business Combination because LG Studios’ existing equity holder (Lions Gate Parent), will have a controlling financial interest in the combined company under the no additional redemption and maximum redemption scenarios with at least 82.5% (currently expected to be 85.7% assuming no additional redemptions or 87.3% assuming maximum redemptions) of the voting interest in each scenario and the ability to nominate and elect the majority of the Pubco Board.

 

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In connection with the Sponsor Securities Repurchase, 2,200,000 SEAC Sponsor Options to receive Pubco Common Shares pursuant to the Sponsor Option Agreement will be issued and have an exercise price of $0.0001

per share. The options will become exercisable (i) on or after the date on which the trading price of the Pubco Common Shares (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) equals or exceeds $16.05 per share or (ii) if a Change of Control (as defined in the Sponsor Option Agreement) occurs, subject to certain conditions. The options are not considered compensatory nor will they be granted in exchange for a good or service. As a contingent consideration arrangement, the options are expected to meet the requirements for equity classification because they are considered to be indexed to the Pubco Common Shares and would be classified in stockholders’ equity. Pubco will record the fair value of the options to equity at the Closing Date.

Description of Acquisition of eOne and Other Transactions

On December 27, 2023, Lions Gate Parent and its subsidiaries completed the acquisition of all of the issued and outstanding equity interests of the companies constituting the eOne business for an aggregate preliminary purchase price of $385.1 million, which reflects the cash purchase price of $375.0 million and an amount for estimated purchase price adjustments including cash, debt and working capital, and the assumption by the Lions Gate Parent of certain production financing indebtedness. Upon closing, eOne is reflected in LG Studios Motion Picture and Television Production segments. Lions Gate Parent funded the acquisition of eOne with a combination of cash on hand and a drawdown of $375.0 million under its revolving credit facility.

On January 2, 2024, Lions Gate Parent closed on the acquisition of an additional 25% of 3 Arts Entertainment representing approximately half of the noncontrolling interest for approximately $194.1 million. In addition, Lions Gate Parent purchased certain profit interests, held by certain managers, and entered into certain option rights agreements providing noncontrolling interest holders the right to sell and Lions Gate Parent the right to purchase their remaining (24%) interest beginning in January 2027. Lions Gate Parent funded the acquisition of additional interest in 3 Arts Entertainment primarily with a drawdown of $194.1 million under its revolving credit facility.

Accounting Treatment of the acquisition of eOne

As LG Studios is determined to be the accounting acquirer in the acquisition of eOne, the acquisition is considered a business combination under Accounting Standard Codification (“ASC”) Topic 805 and was accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total estimated purchase price, has been allocated to the tangible and intangible assets acquired and liabilities assumed of eOne based on a preliminary estimate of their fair value, and such estimates are reflected in LG Studios historical combined balance sheet as December 31, 2023. The preliminary allocation of the estimated purchase price is based upon management’s estimates based on information currently available and is subject to revision as a more detailed analysis is completed and additional information on the fair value of the assets and liabilities become available and final appraisals and analysis are completed. LG Studios is still evaluating the fair value of film and television programs and libraries, projects in development, intangible assets, and income taxes, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. Differences between these preliminary estimates and the final acquisition accounting could occur and these differences could be material. A change in the fair value of the net assets of eOne may change the amount of the purchase price allocable to goodwill, and could have a material impact on the accompanying unaudited pro forma condensed combined statements of operations.

Basis of Pro Forma Presentation

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. Management has made significant estimates and assumptions in its determination of the pro forma adjustments based on information available as of the date of this prospectus. As the unaudited

 

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pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented as additional information becomes available. Management considers this basis of presentation to be reasonable under the circumstances.

Pursuant to the SEAC Articles, the SEAC Public Shareholders may request that SEAC redeem all or a portion of such shareholder’s SEAC Class A Ordinary Shares for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account if the Business Combination is consummated.

The unaudited pro forma condensed combined financial information gives effect to the Transactions, including:

 

   

Transaction accounting adjustments related to the Business Combination (see Note 4)

 

   

the PIPE Financing (but excluding the impact of PIPE Investors’ potential exercise of Reduction Rights described above);

 

   

the Sponsor Securities Repurchase and Class B Conversion;

 

   

the issuance of New SEAC Class A Ordinary Shares in connection with the SEAC Merger, subject to the redemption scenarios described below;

 

   

the SEAC Public Warrant Exchange;

 

   

the SEAC Private Placement Warrant Forfeiture;

 

   

the Post-Arrangement Repayment; and

 

   

the related income tax effects of the Business Combination pro forma adjustments.

 

   

eOne acquisition and other transaction accounting adjustments (see Note 6)

 

   

the acquisition of eOne inclusive of the following:

 

   

reclassification of certain eOne historical financial information to conform to LG Studios presentation of similar expenses; and

 

   

other adjustments, including those related to interest expense on the additional drawdown of LG Studios revolving credit facility that was used to finance the acquisition of eOne, and future expense associated with the acquired assets.

 

   

the acquisition of an additional interest in 3 Arts Entertainment for $194.1 million and additional drawdown of LG Studios revolving credit facility to finance the acquisition; and

 

   

the related income tax effects of the eOne acquisition and other transaction pro forma adjustments.

The unaudited pro forma condensed combined financial information presents two redemption scenarios as follows:

 

   

Assuming No Additional Redemptions: This presentation assumes that none of the current holders of SEAC’s Class A Ordinary Shares exercise redemption rights with respect to such shares (but takes into account redemptions that already occurred in connection with the Extension Meeting).

 

   

Assuming Maximum Redemptions: This presentation assumes that holders of 5,531,192 SEAC Class A Ordinary Shares exercise redemption rights with respect to such shares for their pro rata share (projected to be approximately $10.735 per share as of Closing) of the funds in the Trust Account. As described above, the Business Combination Agreement, as amended, includes a condition that, at the Closing, aggregate transaction proceeds be at least equal to $350.0 million in cash, including (i) at least $125.0 million in cash from the Trust Account (after reduction for the aggregate amount of payments required to be made in connection with any redemption), plus (ii) the aggregate amount of cash that has

 

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been funded pursuant to the PIPE. Thus, the redemption of 5,531,192 SEAC Class A Ordinary Shares represents the estimated maximum number of SEAC Class A Ordinary Shares that can be redeemed while still achieving the minimum aggregate transaction proceeds of $350.0 million.

The following summarizes the pro forma capitalization of the post-combination company expected immediately following the Closing, presented under the two redemption scenarios:

 

     Assuming No
Additional
Redemptions
(Shares)
     %     Assuming
Maximum
Redemptions
(Shares)
     %  

Lions Gate Parent(1)

     253,435,794        85.7     253,435,794        87.3

SEAC Public Shareholders(2)

     17,175,223        5.8     11,644,031        4.0

SEAC Sponsor and its permitted transferees(3)

     2,010,000        0.7     2,010,000        0.7

PIPE Investors

     23,091,217        7.8     23,091,217        8.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Pro Forma Common Stock Outstanding

     295,712,234        100.0     290,181,042        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

The number of shares to be issued to Studio HoldCo, a subsidiary of Lions Gate Parent, will be determined at closing based on (i) a value of $4.6 billion, less certain indebtedness and other adjustments at Closing; divided by (ii) the Closing Share price of $10.70. The net value for purposes of this pro forma condensed combined financial information is assumed to be approximately $2.7 billion. The potential change in the number of shares to be issued to Studio HoldCo, a subsidiary of Lions Gate Parent, for the potential change in indebtedness and certain other adjustments is not expected to be material.

(2)

Both scenarios reflect actual redemptions of 57,824,777 SEAC Class A Ordinary Shares in connection with the Extension Meeting.

(3)

Excludes options for the purchase of 2,200,000 Pubco Common Shares subject to certain vesting restrictions pursuant to the Sponsor Option Agreement.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2023

(in millions)

 

    LG Studios
(As Adjusted)
(Note 6)
    SEAC
(Historical)
    Autonomous
Entity
Adjustments
(Note 3)
    Transaction
Accounting
Adjustments:
Business
Combination
(Assuming No
Additional
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming No
Additional
Redemptions)
    Additional
Transaction
Accounting
Adjustments
(Assuming
Maximum
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming
Maximum
Redemptions)
 

Assets

                 

Cash and cash equivalents

  $ 247.1     $ 1.0       $ 184.4       (b   $ 237.4       2.1       (c   $ 237.4  
          (6.5     (c       57.3       (o  
          225.0       (d       (59.4     (p  
          —        (f        
          (12.5     (j        
          (26.9     (k        
          (374.2     (o        

Accounts receivable, net

    734.1       —              734.1           734.1  

Due from Starz Business

    66.5       —              66.5           66.5  

Prepaid expenses

    —        0.2             0.2           0.2  

Other current assets

    417.1       —          (1.9     (k     415.2           415.2  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current assets

    1,464.8       1.2       —        (12.6       1,453.4       —          1,453.4  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Cash and investments held in Trust Account

    —        794.8         (610.4     (a     —            —   
          (184.4     (b        

Investment in films and television programs, net

    1,908.2       —              1,908.2           1,908.2  

Property and equipment, net

    35.9       —              35.9           35.9  

Investments

    71.5       —              71.5           71.5  

Intangible assets, net

    26.9       —              26.9           26.9  

Goodwill

    801.4       —              801.4           801.4  

Other assets

    810.4       —              810.4           810.4  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total assets

  $ 5,119.1     $ 796.0     $ —      $ (807.4     $ 5,107.7     $ —        $ 5,107.7  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Liabilities

                 

Accounts payable

  $ 214.1     $ —          —        $ 214.1         $ 214.1  

Content related payables

    66.7       —              66.7           66.7  

Other accrued liabilities

    263.3       3.6         (5.4     (k     261.5           261.5  

Participations and residuals

    595.9       —              595.9           595.9  

Film related obligations

    1,258.2       —              1,258.2           1,258.2  

Debt - short term portion

    50.3       —              50.3           50.3  

Deferred revenue

    248.0       —              248.0           248.0  

PIPE with reduction right liability

    —        18.3         (18.3     (d     —            —   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current liabilities

    2,696.5       21.9       —        (23.7       2,694.7       —          2,694.7  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Debt

    1,736.5       —          (374.2     (o     1,362.3       57.3       (o     1,419.6  

Participations and residuals

    472.0       —              472.0           472.0  

Film related obligations

    554.4       —              554.4           554.4  

Other liabilities

    497.2       —              497.2           497.2  

Deferred revenue

    81.5       —              81.5           81.5  

Deferred tax liabilities

    18.8       —              18.8           18.8  

Warrant liability

    —        0.5         (0.5     (i     —            —   

Deferred underwriting compensation

    —        26.3         (26.3     (c     —            —   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities

    6,056.9       48.7       —        (424.7       5,680.9       57.3         5,738.2  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2023

(in millions)

 

    LG Studios
(As Adjusted)
(Note 6)
    SEAC
(Historical)
    Autonomous
Entity
Adjustments
(Note 3)
    Transaction
Accounting
Adjustments:
Business
Combination
(Assuming No
Additional
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming No
Additional
Redemptions)
    Additional
Transaction
Accounting
Adjustments
(Assuming
Maximum
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming
Maximum
Redemptions)
 

Commitments and contingencies

                 

Redeemable noncontrolling interest

    53.7       —              53.7           53.7  

Class A ordinary shares subject to possible redemption

    —        794.7         (610.4     (a     —            —   
          (184.3     (e        

Stockholders’ equity

                 

Preference shares

    —        —              —            —   

Ordinary shares

                 

Class A

    —        —          —        (e     —            —   
          —        (g        
          —        (h        

Class B

    —        —          —        (f     —            —   
          —        (g        

Parent net investment

    (1,090.5     —          1,090.5       (m     —            —   

Pubco Common Shares, no par value

    —        —          243.3       (d     364.6       2.1       (l     307.3  
          —        (h       (59.4     (q  
          (17.9     (k        
          192.1       (l        
          (52.9     (n        

Additional paid-in capital

    —        —          19.8       (c     —        2.1       (b     —   
          184.3       (e       (2.1     (l  
          —        (f        
          0.5       (i        
          (12.5     (j        
          (192.1     (l        

Accumulated other comprehensive income

    97.2       —              97.2           97.2  

Retained earnings (accumulated deficit)

    —        (47.4       —        (a     (1,090.5         (1,090.5
          (5.5     (k        
          52.9       (n        
          (1,090.5     (m        
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total stockholders’ equity (deficit)

    (993.3     (47.4     —        412.0         (628.7     (57.3       (686.0

Noncontrolling interest

    1.8       —              1.8           1.8  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total equity (deficit)

    (991.5     (47.4     —        412.0         (626.9     (57.3       (684.2
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities, redeemable noncontrolling interest and equity (deficit)

  $ 5,119.1     $ 796.0     $ —      $ (807.4     $ 5,107.7     $ —        $ 5,107.8  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2023

(in millions, except share and per share data)

 

    For the Nine
Months Ended
December 31,
2023
    For the Nine
Months Ended
December 31,
2023
                            For the Nine
Months
Ended
December 31,
2023
                For the Nine
Months
Ended
December 31,
2023
 
    LG Studios
(As Adjusted)
(Note 6)
    SEAC
(Historical)
    Autonomous
Entity
Adjustments
(Note 3)
          Transaction
Accounting
Adjustments:
Business
Combination
(Assuming No
Additional
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming No
Additional
Redemptions)
    Additional
Transaction
Accounting
Adjustments
(Assuming
Maximum
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming
Maximum
Redemptions)
 

Revenue:

                   

Revenue

  $ 2,103.5     $ —              $ 2,103.5         $ 2,103.5  

Revenue- Starz Business

    422.1       —                422.1           422.1  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Total revenue

    2,525.6       —        —          —          2,525.6       —          2,525.6  

Expenses:

                   

Direct operating

    1,577.0       —                1,577.0           1,577.0  

Distribution and marketing

    374.4       —                374.4           374.4  

General and administration

    349.1       5.1       15.0       (A     (0.1     (aa     369.1           369.1  

Depreciation and amortization

    16.1       —                16.1           16.1  

Restructuring and other

    61.5       —                61.5           61.5  

Goodwill and intangible asset impairment

    296.2       —                296.2           296.2  

PIPE with reduction right expense

    —        18.8           (18.8     (cc     —            —   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Total expenses

    2,674.3       23.9       15.0         (18.9       2,694.3       —          2,694.3  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Operating income (loss)

    (148.7     (23.9     (15.0       18.9         (168.7     —          (168.7

Interest expense

    (217.1     —            20.1       (ee     (197.0     (3.1     (ee     (200.1

Interest and other income

    12.4       —                12.4           12.4  

Other expense

    (17.1     —                (17.1         (17.1

Gain on investments, net

    2.7       —                2.7           2.7  

Equity interests income

    5.7       —                5.7           5.7  

Interest from investments held in Trust Account

    —        29.7           (29.7     (bb     —            —   

Change in fair value of warrant liability

    —        2.3           (2.3     (dd     —            —   

Change in fair value of PIPE with reduction right liability

    —        0.5           (0.5     (cc     —            —   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

    (362.1     8.6       (15.0       6.5         (362.0     (3.1       (365.1

Income tax provisions

    21.7       —        —        (B     —        (ff     21.7           21.7  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Net income (loss)

    (340.4     8.6       (15.0       6.5         (340.3     (3.1       (343.4

Less: Net loss attributable to noncontrolling interests

    2.7       —        —          —          2.7           2.7  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Net income (loss) attributable to controlling interest

  $ (337.7   $ 8.6     $ (15.0     $ 6.5       $ (337.6   $ (3.1     $ (340.7
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Net income (loss) per share, basic and diluted

    $ 0.09             $ (1.14       $ (1.17

Weighted average shares outstanding, basic and diluted

      93,750,000               295,712,234           290,181,042  

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED MARCH 31, 2023

(in millions, except share and per share data)

 

    For the Year
Ended
March 31,
2023
    For the Year
Ended
December 31,
2022
                            For the Year
Ended
March 31,
2023
                For the Year
Ended
March 31,
2023
 
    LG Studios
(As Adjusted)
(Note 6)
    SEAC
(Historical)
    Autonomous
Entity
Adjustments
(Note 3)
          Transaction
Accounting
Adjustments:
Business
Combination
(Assuming No
Additional
Redemptions)
(Note 4)
          Pro Forma
Combined
(Assuming No
Additional
Redemptions)
    Additional
Transaction
Accounting
Adjustments
(Assuming
Maximum
Redemptions)
(Note 4)
   

 

    Pro Forma
Combined
(Assuming
Maximum
Redemptions)
 

Revenue:

                   

Revenue

  $ 3,136.1     $ —              $ 3,136.1         $ 3,136.1  

Revenue- Starz Business

    775.5       —                775.5           775.5  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Total revenue

    3,911.6       —        —          —          3,911.6       —          3,911.6  

Expenses:

                   

Direct operating

    2,750.8       —                2,750.8           2,750.8  

Distribution and marketing

    323.5       —                323.5           323.5  

General and administration

    514.4       1.6       21.4       (A     (0.2     (aa     537.2           537.2  

Depreciation and amortization

    24.2       —                24.2           24.2  

Restructuring and other

    51.0       —                51.0           51.0  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Total expenses

    3,663.9       1.6       21.4         (0.2       3,686.7       —          3,686.7  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Operating income (loss)

    247.7       (1.6     (21.4       0.2         224.9       —          224.9  

Interest expense

    (217.3     —            26.8       (ee     (190.5     (4.1     (ee     (194.6

Interest and other income

    9.6       —                9.6           9.6  

Other expense

    (14.5     —                (14.5         (14.5

Loss on extinguishment of debt

    (1.3     —                (1.3         (1.3

Gain on investments, net

    44.0       —                44.0           44.0  

Equity interests income

    0.5       —                0.5           0.5  

Interest from investments held in Trust Account

    —        10.0           (10.0     (bb     —            —   

Change in fair value of warrant liability

    —        14.2           (14.2     (dd     —            —   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

    68.7       22.6       (21.4       2.8         72.7       (4.1       68.6  

Income tax provisions

    (26.4     —        0.3       (B     —        (ff     (26.1         (26.1
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Net income (loss)

    42.3       22.6       (21.1       2.8         46.6       (4.1       42.5  

Less: Net loss attributable to noncontrolling interests

    0.6       —        —              0.6           0.6  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Net income (loss) attributable to controlling interest

  $ 42.9     $ 22.6     $ (21.1     $ 2.8       $ 47.2     $ (4.1     $ 43.1  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

     

 

 

 

Net income per share, basic and diluted

    $ 0.24             $ 0.16         $ 0.15  

Weighted average shares outstanding, basic and diluted

      91,900,685               295,712,234           290,181,042  

 

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Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Basis of Presentation

The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with GAAP, whereby SEAC is treated as the acquired company and LG Studios is treated as the acquirer. Accordingly, for accounting purposes, the Business Combination is expected to be treated as the equivalent of LG Studios issuing stock for the net assets of SEAC, accompanied by a recapitalization. The net assets of SEAC will be stated at fair value, which approximates their historical cost, with no goodwill or other intangible assets recorded. Subsequently, results of operations presented for the periods prior to the Business Combination will be for those of LG Studios.

As LG Studios was determined to be the accounting acquirer in the acquisition of eOne, the acquisition was considered a business combination under ASC 805, and was accounted for using the acquisition method of accounting. LG Studios recorded the preliminary estimated fair value of assets acquired and liabilities assumed from eOne upon acquisition, on December 27, 2023. Fair value is defined in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective, and it is possible the application of reasonable judgment could result in different assumptions resulting in a range of alternative estimates using the same facts and circumstances. The preliminary allocation of the estimated purchase price is based upon management’s estimates based on information currently available and is subject to revision as a more detailed analysis is completed and additional information on the fair value of the assets and liabilities become available and final appraisals and analysis are completed. The preliminary estimated fair value of the assets and liabilities are reflected in the historical balance sheet of LG Studios presented herein; however, LG Studios is still evaluating the fair value of film and television programs and libraries, projects in development, intangible assets, and income taxes, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. Differences between these preliminary estimates and the final acquisition accounting could occur and these differences could be material. A change in the fair value of the net assets of eOne may change the amount of the purchase price allocable to goodwill, and could have a material impact on the accompanying unaudited pro forma condensed combined statements of operations.

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 gives pro forma effect to the Business Combination as if it had been consummated on December 31, 2023. The unaudited pro forma condensed combined statements of operations for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 give pro forma effect to the Business Combination as if it had been consummated on April 1, 2022. See Note 4.

LG Studios (as adjusted) in the unaudited proforma condensed combined balance sheet as of December 31, 2023 is derived from the pro forma balance sheet information, as presented in Note 6, which reflects the historical balance sheet of LG Studios, inclusive of the preliminary estimated fair value of assets acquired and liabilities assumed upon the completed acquisition of eOne, on a pro forma basis as if the other transactions had been consummated on December 31, 2023. Similarly, LG Studios (as adjusted) in the unaudited proforma condensed combined statements of operations for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 are derived from the pro forma statement of operation information, as presented in Note 6, which combines the historical statements of operations of LG Studios and eOne on a pro forma basis as if the acquisition of eOne and other transactions had been consummated on April 1, 2022.

LG Studios’ fiscal year ends on March 31, eOne’s fiscal year ends on the last Sunday in December and SEAC’s fiscal year ends on December 31. The pro forma condensed combined financial information is presented on the basis of LG Studios’ fiscal year and combines the historical results of the fiscal periods of LG Studios, eOne and SEAC.

 

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Table of Contents

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 has been prepared using, and should be read in conjunction with, the following:

 

   

LG Studios’ unaudited condensed combined balance sheet as of December 31, 2023 and the related notes included elsewhere in this prospectus; and

 

   

SEAC’s audited balance sheet as of December 31, 2023 and the related notes included elsewhere in this prospectus.

The unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2023 has been prepared using, and should be read in conjunction with, the following:

 

   

LG Studios’ unaudited condensed combined statement of operations for the nine months ended December 31, 2023 and the related notes included elsewhere in this prospectus;

 

   

eOne’s unaudited combined statement of operations for the nine months ended October 1, 2023 and the related notes included elsewhere in this prospectus; and

 

   

SEAC’s unaudited condensed statement of operations for the nine months ended December 31, 2023 and the related notes included elsewhere in this prospectus, as adjusted to exclude SEAC’s results of operations for the three-months ended March 31, 2023 included in SEAC’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2023. Therefore, SEAC’s net income for the three-months ended March 31, 2023 of $8.0 million is excluded from the unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2023.

The unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2023 has been prepared using, and should be read in conjunction with, the following:

 

   

LG Studios’ audited combined statement of operations for the fiscal year ended March 31, 2023 and the related notes included elsewhere in this prospectus;

 

   

eOne’s audited combined statement of operations for the fiscal year ended December 25, 2022 and the related notes included elsewhere in this prospectus; and

 

   

SEAC’s audited statement of operations for the year ended December 31, 2022 and the related notes included elsewhere in this prospectus.

The foregoing historical financial statements have been prepared in accordance with GAAP. The unaudited pro forma condensed combined financial information has been prepared based on the aforementioned historical financial statements and the assumptions and adjustments as described in the notes to the unaudited pro forma condensed combined financial information. Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

The unaudited pro forma condensed combined financial information does not give effect to any synergies, operating efficiencies, tax savings or cost savings that may be associated with the Transactions.

The pro forma adjustments reflecting the completion of the Transactions are based on currently available information and assumptions and methodologies that management believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Transactions based on information available to management at the current time.

 

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Table of Contents

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of LG Studios, eOne and SEAC.

2. Accounting Policies

As part of preparing the unaudited pro forma condensed combined financial information, LG Studios conducted an initial review of the accounting policies and practices of SEAC and eOne to determine if differences in accounting policies and practices require reclassification of results of operations or reclassification of assets or liabilities to conform to LG Studios’ accounting policies and practices. Based on its initial analysis, management did not identify any differences between LG Studios and SEAC that would have a material impact on the unaudited pro forma condensed combined financial information; however preliminary reclassifications to eOne were identified and are reflected in the unaudited pro forma condensed combined financial information (see Note 6). LG Studios will continue its detailed review of SEAC’s and eOne’s accounting policies and practices and as a result of that review, LG Studios may identify additional differences between the accounting policies and practices of the companies that, when conformed, could have a material impact on the consolidated financial statements of Pubco following the Closing.

3. Autonomous Entity Adjustments to Unaudited Pro Forma Condensed Combined Financial Information Related to the Business Combination

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only. Autonomous entity adjustments are presented as LG Studios has historically operated as part of Lionsgate and additional contractual agreements are expected to be executed to operate as a standalone reporting entity.

Autonomous Entity Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The unaudited pro forma condensed combined balance sheet as of December 31, 2023 does not reflect amounts for autonomous entity adjustments as management does not anticipate that the net asset impact derived from expected contractual arrangements, primarily related to the intercompany financing arrangements, will be materially different than the historical impact for the corporate debt that has been allocated by Lionsgate to LG Studios in its historical unaudited condensed combined balance sheet as of December 31, 2023.

Autonomous Entity Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The autonomous entity adjustments included in the unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 are as follows:

 

  (A)

Reflects an adjustment to the estimated incremental portion of Lions Gate Parent’s corporate general and administrative functions and expenses, including stock based compensation expense for Lions Gate Parent equity awards, related to the corporate functions, that are expected to remain with LG Studios, pursuant to the execution of the shared-services agreement, which is subject to finalization. The shared-services agreement is expected to be executed in connection with the Closing and result in additional corporate expenses that will be incurred by LG Studios. The total amount of Lions Gate Parent’s corporate expenses to be recorded by LG Studios is expected to reflect all of Lions Gate Parent’s corporate general and administrative expenses, combined, less approximately $7.5 million and $10.0 million for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023, respectively, which are expected to remain with Lions Gate Parent.

 

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  (B)

Reflects the adjustment to income tax expense for the fiscal year ended March 31, 2023, as a result of the estimated state tax impact on the autonomous entity adjustment. No adjustment is reflected for the nine months ended December 31, 2023 based on LG Studios’ estimated annual effective tax rate for the fiscal year ending March 31, 2024 and LG Studios having a full valuation allowance on its net deferred tax asset.

4. Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Financial Information related to the Business Combination

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only.

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had Pubco following the Closing, filed consolidated income tax returns during the periods presented.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the expected number of Pubco shares outstanding, assuming the Business Combination occurred on April 1, 2022.

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet related to the Business Combination

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2023 are as follows:

 

  (a)

Reflects actual redemptions, net of increases in the Trust Account associated with interest earned between December 31, 2023 and the Extension Meeting. On April 9, 2024, 57,824,777 SEAC Class A Ordinary Shares were submitted for redemption in connection with the Extension Meeting. Such 57,824,777 SEAC Class A Ordinary Shares were redeemed at a redemption price of approximately $10.735 per share, for an aggregate of $620.8 million. The interest earned in the Trust Account between December 31, 2023 and April 10, 2024 was approximately $10.4 million. The adjustment to Class A Ordinary Shares subject to possible redemption reflects the decrease attributable to the redemption amount of $620.8 million, net of the accretion to the redemption value of $10.4 million.

 

  (b)

Reflects the reclassification of cash and investments held in the Trust Account that becomes available following the Business Combination to cash and cash equivalents, assuming no additional redemptions (but takes into account redemptions that already occurred in connection with the Extension Meeting).

 

  (c)

Reflects the payment of $6.5 million in deferred underwriters’ compensation in the no additional redemption scenario and reduced payment of $4.4 million in deferred underwriters’ compensation in the maximum redemption scenario subject to amended agreements with the underwriters. The payment reflects 3.5% of the estimated Trust Account at Closing of $184.4 million in the no additional redemption scenario and $125.0 million in the maximum redemption scenario, respectively, after giving effect to the redemptions, for a difference of $2.1 million between the no additional redemption scenario and maximum redemption scenario. The portion of the deferred underwriting fee that is not expected to be paid at Closing is reflected as an increase to additional paid-in capital, and then reclassified to Pubco Common Shares in Note 4(l) below.

 

  (d)

Reflects proceeds of $225.0 million from the issuance and sale of (i) 18,172,378 shares of Pubco Common Shares at $9.63 per share and (ii) 4,918,839 shares of PubCo Common Shares at $10.165 per share pursuant to the Subscription Agreements and elimination of PIPE with reduction right liability of $18.3 million. Transaction costs of $6.8 million associated with the issuance and sale of shares of PubCo Common Shares are reflected and described in Note 4(k) below.

 

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  (e)

Reflects the reclassification of $184.3 million of SEAC Class A Ordinary Shares subject to possible redemption to permanent equity, assuming no additional redemptions.

 

  (f)

Reflects the Sponsor Securities Repurchase of 16,740,000 SEAC Class B Ordinary Shares held by the Sponsor for $1.00 and 2,200,000 SEAC Sponsor Options.

 

  (g)

Reflects the Class B Conversion of 2,010,000 SEAC Class B Ordinary Shares into 2,010,000 SEAC Class A Ordinary Shares.

 

  (h)

Reflects the exchange of 19,185,223 SEAC Class A Ordinary Shares (including 2,010,000 SEAC Class A Ordinary Shares converted in adjustment 4(g) above) for 19,185,223 Pubco Common Shares, assuming no additional redemptions.

 

  (i)

Reflects SEAC Private Placement Warrant Forfeiture of 11,733,333 SEAC Private Placement Warrants held by the Sponsor.

 

  (j)

Reflects the SEAC Public Warrant Exchange for the exchange of 25,000,000 SEAC Public Warrants for $0.50 per whole public warrant.

 

  (k)

Reflects preliminary estimated transaction costs incurred by LG Studios and SEAC of approximately $11.1 million and $16.2 million, respectively, for legal, financial advisory and other professional fees.

 

   

For LG Studios’ estimated transaction costs:

 

   

adjustment reflects elimination of $1.8 million of transaction costs that were deferred in other current assets and accrued in other accrued liabilities as of December 31, 2023;

 

   

adjustment reflects elimination of $0.1 million of transaction costs that were deferred in other current assets and paid as of December 31, 2023;

 

   

adjustment reflects a reduction of cash of $11.0 million, which represents LG Studio’s estimated transaction costs less amounts previously paid by LG Studios as of December 31, 2023;

 

   

adjustment reflects $11.1 million of estimated transaction costs capitalized and offset against the proceeds from the Business Combination and reflected as a decrease in Pubco Common Shares.

 

   

For SEAC’s estimated transaction costs, which exclude the deferred underwriting compensation described in Note 4(b) above:

 

   

adjustment reflects $3.6 million of transaction costs accrued by SEAC in other accrued liabilities and recognized as expense as of December 31, 2023;

 

   

adjustment reflects $0.4 million of transaction costs recognized in expense and paid as of December 31, 2023;

 

   

adjustment reflects $15.9 million of transaction costs as a reduction of cash, which represents SEAC’s preliminary estimated transaction costs less amounts previously paid by SEAC as of December 31, 2023; and

 

   

adjustment reflects $5.5 million of transaction costs as an adjustment to accumulated deficit as of December 31, 2023, which represents the total estimated SEAC transaction costs less $4.0 million previously recognized by SEAC as of December 31, 2023 and $6.8 million of estimated transaction costs capitalized and offset against the proceeds from the Business Combination and reflected as a decrease in Pubco Common Shares.

 

  (l)

Reflects the reclassification of SEAC additional paid-in capital to Pubco Common Shares.

 

  (m)

Reflects the recapitalization of LG Studios’ parent net investment into 253,435,794 Pubco Common Shares, which is adjusted to accumulated deficit.

 

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  (n)

Reflects the elimination of SEAC’s historical accumulated deficit after recording the transaction costs to be incurred by SEAC as described in Note 4(k) above.

 

  (o)

Reflects the transfer of the Post-Arrangement Repayment Amount in cash to Lions Gate Parent. In a no additional redemption scenario, the Post-Arrangement Repayment Amount is calculated based on the aggregate transaction proceeds of approximately $409.4 million (based on the amount estimated to be in the Trust Account as of April 10, 2024), less SEAC transaction expenses as described in Note 4(k) above, less amounts payable pursuant to the SEAC Public Warrant Exchange described in Note 4(j) above and less the deferred underwriters compensation described in Note 4(c) above. In the maximum redemption scenario, the Post-Arrangement Repayment Amount is calculated based on the aggregate transaction proceeds of $350.0 million, less SEAC transaction expenses as described in Note 4(k) above, less amounts payable pursuant to the SEAC Public Warrant Exchange described in Note 4(j) above and less the deferred underwriters compensation described in Note 4(c) above.

 

  (p)

Reflects the maximum redemption of 5,531,192 SEAC Class A Ordinary Shares for approximately $59.4 million at a redemption price of approximately $10.735 per share (based on the amount estimated to be in the Trust Account as of April 10, 2024, less actual redemptions in connection with the Extension Meeting).

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations related to the Business Combination

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023, are as follows:

 

  (aa)

Reflects pro forma adjustment to eliminate historical expenses related to SEAC’s administrative, financial and support services paid to the Sponsor, which will terminate upon consummation of the Business Combination.

 

  (bb)

Reflects pro forma adjustment to eliminate interest from investments held in Trust Account.

 

  (cc)

Reflects pro forma adjustment to eliminate PIPE with reduction right expense and change in fair value of PIPE with reduction right liability which will be settled with the issuance of PIPE shares, as described in Note 4(c) above.

 

  (dd)

Reflects pro forma adjustment to eliminate change in fair value of SEAC Private Placement Warrants, which are forfeited as part of the Business Combination, as described in Note 4(i) above.

 

  (ee)

Reflects pro forma adjustment to reduce interest expense for the reduction of debt associated with the transfer of the Post-Arrangement Repayment Amount in cash to Lions Gate Parent, as described in Note 4(o) above.

 

  (ff)

No income tax adjustment is reflected for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 based on LG Studio’s estimated annual effective tax rate for the fiscal years ending March 31, 2024 and 2023, respectively, and LG Studio having a full valuation allowance on its net deferred tax asset.

5. Income (loss) per Share

Reflects the net income (loss) per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since April 1, 2022. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net income (loss) per share assumes that the shares issuable relating to the Business Combination and related transactions have been outstanding for the entire periods presented. When assuming maximum redemption, this calculation is adjusted to eliminate such shares for the entire period.

 

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The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemption for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023:

 

    Nine Months Ended
December 31, 2023
    Year Ended
March 31, 2023
 
    Assuming No
Additional
Redemptions
    Assuming
Maximum
Redemptions
    Assuming No
Additional
Redemptions
    Assuming
Maximum
Redemptions
 

Pro forma net income (loss) attributable to common shareholders (in millions)

  $ (337.6   $ (340.7   $ 47.2     $ 43.1  

Pro forma weighted average shares outstanding, basic and diluted

    295,712,234       290,181,042       295,712,234       290,181,042  

Pro forma net income (loss) per share, basic and diluted

  $ (1.14   $ (1.17   $ 0.16     $ 0.15  

Pro forma weighted average shares calculation, basis and diluted

       

SEAC Public Shareholders

    17,175,223       11,644,031       17,175,223       11,644,031  

SEAC Sponsor and its permitted transferees (1)

    2,010,000       2,010,000       2,010,000       2,010,000  

PIPE Investors

    23,091,217       23,091,217       23,091,217       23,091,217  

Lions Gate Parent

    253,435,794       253,435,794       253,435,794       253,435,794  
 

 

 

   

 

 

   

 

 

   

 

 

 
    295,712,234       290,181,042       295,712,234       290,181,042  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The pro forma basic and diluted shares of the holders of SEAC Sponsor shares exclude the options to purchase 2,200,000 Pubco Common Shares subject to certain vesting restrictions set forth in the Sponsor Option Agreement.

6. Adjustments to LG Studios for the Acquisition of eOne and Other Transactions

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined financial information has been prepared to illustrate the preliminary estimated effect of LG Studios’ acquisition of eOne and other transactions, prior to the Autonomous Entity Adjustments described in Note 3 and prior to the Transaction Accounting Adjustments related to the Business Combination described in Note 4, and has been prepared for informational purposes only.

 

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LG Studios (as adjusted) in the unaudited proforma condensed combined balance sheet as of December 31, 2023 reflects the historical balance sheet of LG Studios, inclusive of the preliminary estimated fair value of assets acquired and liabilities assumed upon the completed acquisition of eOne described below, adjusted for the other transactions as if they had been consummated on December 31, 2023.

 

     LG Studios
(Historical)
    Other
Adjustments
          LG Studios
(As Adjusted)
 

Assets

        

Cash and cash equivalents

   $ 247.1     $ —        (A )(B)    $ 247.1  

Accounts receivable, net

     734.1           734.1  

Due from Starz Business

     66.5           66.5  

Other current assets

     417.1           417.1  
  

 

 

   

 

 

     

 

 

 

Total current assets

     1,464.8       —          1,464.8  
  

 

 

   

 

 

     

 

 

 

Investment in films and television programs, net

     1,908.2           1,908.2  

Property and equipment, net

     35.9           35.9  

Investments

     71.5           71.5  

Intangible assets, net

     26.9           26.9  

Goodwill

     801.4           801.4  

Other assets

     810.4           810.4  
  

 

 

   

 

 

     

 

 

 

Total assets

   $ 5,119.1     $ —        $ 5,119.1  
  

 

 

   

 

 

     

 

 

 

Liabilities

        

Accounts payable

   $ 214.1         $ 214.1  

Content related payables

     66.7           66.7  

Other accrued liabilities

     263.3           263.3  

Participations and residuals

     595.9           595.9  

Film related obligations

     1,258.2           1,258.2  

Debt - short term portion

     50.3           50.3  

Deferred revenue

     248.0           248.0  
  

 

 

   

 

 

     

 

 

 

Total current liabilities

     2,696.5       —          2,696.5  
  

 

 

   

 

 

     

 

 

 

Debt

     1,542.4       194.1       (A     1,736.5  

Participations and residuals

     472.0           472.0  

Film related obligations

     554.4           554.4  

Other liabilities

     338.8       158.4       (C     497.2  

Deferred revenue

     81.5           81.5  

Deferred tax liabilities

     18.8           18.8  
  

 

 

   

 

 

     

 

 

 

Total liabilities

     5,704.4       352.5         6,056.9  
  

 

 

   

 

 

     

 

 

 

Commitments and contingencies

        

Redeemable noncontrolling interest

     406.2       (352.5     (B )(C)      53.7  

Equity (Deficit)

        

Parent net investment

     (1,090.5         (1,090.5

Accumulated other comprehensive income

     97.2           97.2  
  

 

 

   

 

 

     

 

 

 

Total parent equity (deficit)

     (993.3     —          (993.3

Noncontrolling interest

     1.8           1.8  
  

 

 

   

 

 

     

 

 

 

Total equity (deficit)

     (991.5     —          (991.5
  

 

 

   

 

 

     

 

 

 

Total liabilities, redeemable noncontrolling interest and equity (deficit)

   $ 5,119.1     $ —        $ 5,119.1  
  

 

 

   

 

 

     

 

 

 

 

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LG Studios (as adjusted) in the unaudited pro forma condensed combined statements of operations for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 combines the historical statements of operations of LG Studios and eOne for such periods as described in Note 1, on a pro forma basis as if the acquisition of eOne and other transactions had been consummated on April 1, 2022, the beginning of the earliest period presented. As the eOne acquisition occurred on December 27, 2023, the historical statement of operations of LG Studios for the nine months ended December 31, 2023 includes four days of activity of eOne, which was not material.

 

    For the
Nine Months
Ended
December 31,
2023
    For the
Nine Months
Ended
October 1,
2023
                            For the
Nine Months
Ended
December 31,
2023
 
    LG Studios
(Historical)
    eOne
(As Reclassified)
    PPA
Adjustments
          Other
Adjustments
          LG Studios
(As Adjusted)
 

Revenue:

             

Revenue

  $ 1,684.2     $ 419.3             $ 2,103.5  

Revenue- Starz Business

    422.1       —                422.1  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total revenue

    2,106.3       419.3       —          —          2,525.6  

Expenses:

             

Direct operating

    1,306.0       320.5       (49.5     (AA         1,577.0  

Distribution and marketing

    346.0       28.4               374.4  

General and administration

    261.6       87.5               349.1  

Depreciation and amortization

    11.1       18.5       (13.5     (BB         16.1  

Restructuring and other

    61.5       —                61.5  

Impairment of goodwill and trade name

    —        296.2               296.2  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

    1,986.2       751.1       (63.0       —          2,674.3  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating income (loss)

    120.1       (331.8     63.0         —          (148.7

Interest expense

    (157.1     (29.4         (30.6     (DD     (217.1

Interest and other income

    6.9       5.5               12.4  

Other expense

    (14.3     (2.8             (17.1

Gain on investments, net

    2.7       —                2.7  

Equity interests income

    5.7       —                5.7  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Income (loss) before income taxes

    (36.0     (358.5     63.0         (30.6       (362.1

Income tax provisions

    (16.7     38.4       —        (CC     —        (EE     21.7  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income (loss)

    (52.7     (320.1     63.0         (30.6       (340.4

Less: Net loss (income) attributable to noncontrolling interests

    6.2       —            (3.5     (FF     2.7  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income (loss) attributable to Parent

  $ (46.5   $ (320.1   $ 63.0       $ (34.1     $ (337.7
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

 

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    For the
Year Ended
March 31,
2023
    For the Year
Ended
December 25,
2022
                            For the
Year Ended
March 31,
2023
 
    LG Studios
(Historical)
    eOne (As
Reclassified)
    PPA
Adjustments
          Other
Adjustments
          LG Studios
(As Adjusted)
 

Revenue:

             

Revenue

  $ 2,308.3     $ 827.8             $ 3,136.1  

Revenue- Starz Business

    775.5       —                775.5  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total revenue

    3,083.8       827.8       —          —          3,911.6  

Expenses:

             

Direct operating

    2,207.9       634.5       (91.6     (AA         2,750.8  

Distribution and marketing

    304.2       19.3               323.5  

General and administration

    387.0       127.4               514.4  

Depreciation and amortization

    17.9       26.0       (19.7     (BB         24.2  

Restructuring and other

    27.2       23.8               51.0  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

    2,944.2       831.0       (111.3       —          3,663.9  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating income (loss)

    139.6       (3.2     111.3         —          247.7  

Interest expense

    (162.6     (14.0         (40.7     (DD     (217.3

Interest and other income

    6.4       3.2               9.6  

Other expense

    (21.2     6.7               (14.5

Loss on extinguishment of debt

    (1.3     —                (1.3

Gain on investments, net

    44.0       —                44.0  

Equity interests income

    0.5       —                0.5  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Income (loss) before income taxes

    5.4       (7.3     111.3         (40.7       68.7  

Income tax provisions

    (14.3     (12.7     —        (CC     0.6       (EE     (26.4
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income (loss)

    (8.9     (20.0     111.3         (40.1       42.3  

Less: Net loss (income) attributable to noncontrolling interests

    8.6       (0.6         (7.4     (FF     0.6  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income (loss) attributable to Parent

  $ (0.3   $ (20.6   $ 111.3       $ (47.5     $ 42.9  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

eOne Historical Financial Statements- Reclassifications

Certain preliminary reclassification adjustments have been made to the historical presentation of eOne financial information in order to conform to LG Studios’ statement of operations, see Note 2.

 

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The following summarizes reclassification adjustments to eOne’s historical statement of operations for the fiscal year ended March 31, 2023 for purposes of the unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2023. There were no material reclassification adjustments to eOne’s historical statement of operations for the nine months ended December 31, 2023 identified.

 

     eOne
(Historical)
    Reclassification            eOne
(as reclassified)
 
     (Amounts in millions)  

Net revenues

   $ 827.8       —         $ 827.8  

Costs and expenses:

         

Direct operating

     634.5       —           634.5  

Distribution and marketing

     19.3       —           19.3  

General and administration

     151.2       (23.8     (1      127.4  

Depreciation and amortization

     26.0       —           26.0  

Restructuring and other

     —        23.8       (1      23.8  
  

 

 

   

 

 

      

 

 

 

Total costs and expenses

     831.0       —           831.0  
  

 

 

   

 

 

      

 

 

 

Operating loss

     (3.2     —           (3.2
  

 

 

   

 

 

      

 

 

 

Interest expense

     (14.0     —           (14.0

Interest income

     3.2       —           3.2  

Other expense, net

     6.7       —           6.7  
  

 

 

   

 

 

      

 

 

 

Loss before income taxes

     (7.3     —           (7.3

Income tax provision (benefit)

     (12.7     —           (12.7
  

 

 

   

 

 

      

 

 

 

Net loss

     (20.0     —           (20.0

Less: Net earnings attributable to noncontrolling interests

     (0.6     —           (0.6
  

 

 

   

 

 

      

 

 

 

Net loss attributable to Entertainment One Film and Television Business

   $ (20.6     —         $ (20.6
  

 

 

   

 

 

      

 

 

 

 

(1)

Adjustment to conform eOne’s classification of restructuring and other expense of $23.8 million from general and administration expense to restructuring and other consistent with LG Studios’ classification.

LG Studios’ acquisition of eOne

LG Studios accounted for the acquisition of eOne as a business combination in accordance with GAAP. Accordingly, the purchase price attributable to the acquisition of eOne was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. See Note 2 of LG Studios’ condensed combined financial statements as of and for the nine months ended December 31, 2023 for information on the purchase consideration, fair value estimates of the assets acquired and liabilities assumed, and resulting goodwill as of the December 27, 2023 acquisition date.

In determining the fair value of the assets acquired and liabilities assumed, the Company considered the purchase price of eOne and the underlying cash flows projected in assessing the purchase price for eOne, the competitive bidding process and perspectives of a market participant. With the exception of eOne’s investment in film and television programs, certain property and equipment and right of use assets, the fair value of eOne’s assets and liabilities were determined to approximate book value, with little subjective estimation required (i.e. the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, participations and residuals, film related obligations and other liabilities were estimated to approximate their book values). The adjustment to the historical carrying value of investment in film and television programs of eOne resulting from the estimate of fair value was the largest subjective adjustment required in allocating the estimated purchase price. Investment in film and television programs includes films and television programs in development,

 

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released and unreleased titles and older titles as part of the film and television program library. There are inherent uncertainties in estimating the future cash flows for film and television programs with a higher degree of uncertainty associated with unreleased titles. Such inherent uncertainties could result in a range of estimates in fair value by different market participants.

The preliminary fair value of film and television programs and library was estimated under the principles of ASC 805, which requires assets acquired and liabilities assumed to be measured at fair value as defined in ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This measurement of fair value will inherently differ from the carrying value of investment in film and television programs and library recorded under ASC 926, Entertainment Films (“ASC 926”) The preliminary estimate of the fair value of investment in film and television programs and acquired library was based on projected cash flows from a market participant perspective and were discounted to present value using a discount rate commensurate with the risk of achieving those cash flows of approximately 11.5%. In addition, the discounted cash flow reflects costs for other items such as taxes, certain contributory asset charges, and overhead, which resulted in the fair value estimated under ASC 820 being less than the carrying values of those assets under ASC 926.

Under ASC 805, where the total purchase price exceeds the fair value of the assets acquired and liabilities assumed, the excess is reflected as goodwill, and where the fair value of the assets acquired and liabilities assumed exceeds the total purchase price, the difference results in a gain on the purchase. The preliminary purchase price allocation resulted in approximately $5.8 million of goodwill. A 10% increase in the valuation of investment in film and television programs would result in a bargain purchase gain of approximately $31.0 million, as compared to a 10% decrease in the valuation of investment in film and television programs which would result in an increase in goodwill of approximately $36.8 million.

Other Adjustments to the unaudited pro forma condensed combined balance sheet

 

(A)

Reflects drawdown of $194.1 million from LG Studios revolving credit facility and increase in cash, which was used to finance the acquisition of the additional interest in 3 Arts Entertainment for $194.1 million. The drawdown on the revolving credit facility is classified as noncurrent debt based on the maturity date of April 6, 2026.

 

(B)

Reflects LG Studios acquisition of an additional 25% of 3 Arts Entertainment (a consolidated majority owned subsidiary) in January 2024 for $194.1 million in cash.

 

(C)

Reflects the reclass of substantially all of the remaining 3 Arts Entertainment noncontrolling interest to other liabilities resulting from the modification of contractual terms, which terms now require liability classification.

PPA Adjustments to the unaudited pro forma condensed combined statements of operations

The unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2023 and the fiscal year ended March 31, 2023 includes the following adjustments:

 

(AA)

Reflects estimated decreases of $49.5 million and $91.6 million in amortization expense for the nine months ended December 31, 2023 and the fiscal year ended March 31, 2023, respectively, resulting from the preliminary allocation of purchase consideration to investments in film and television programs, subject to amortization, and adjusting the content library to the preliminary fair value. See Note 2 of LG Studios’ condensed combined financial statements as of and for the nine months ended December 31, 2023 for information on the estimated fair values as of the acquisition date, useful lives and amortization method of acquired investments in film and television programs.

 

(BB)

Reflects estimated decreases of $13.5 million and $19.7 million for the nine months ended December 31, 2023 and the fiscal year ended March 31, 2023, respectively, in amortization and depreciation expense

 

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  resulting from the preliminary allocation of purchase consideration to definite-lived intangible assets subject to amortization and property and equipment. See Note 2 of LG Studios’ condensed combined financial statements as of and for the nine months ended December 31, 2023 for information on the estimated fair values as of the acquisition date, useful lives and amortization method of acquired definite-lived intangible assets subject to amortization and property and equipment.

 

(CC)

No income tax adjustment is reflected for the nine months ended December 31, 2023 and the fiscal year ended March 31, 2023 based on LG Studio’s estimated annual effective tax rate for the fiscal years ending March 31, 2024 and 2023, respectively, and LG Studio having a full valuation allowance on its net deferred tax asset.

Other Adjustment to the unaudited pro forma condensed combined statements of operations

 

(DD)

Reflects the estimated incremental interest expense resulting from the $375.0 million drawdown and $194.1 million drawdown from LG Studios revolving credit facility to fund the acquisition of eOne and the acquisition of additional interest in 3 Arts Entertainment for the nine months ended December 31, 2023 and the fiscal year ended March 31, 2023. The unaudited pro forma financial information reflects an assumed interest rate of 7.16%, based on the Secured Overnight Financing Rate (“SOFR”) as of December 27, 2023 and terms of LG Studios’ revolving credit facility. If the actual annual interest rate of the credit facility were to vary by 1/8th of a percent, the pro forma adjustment for interest expense would change by $0.7 million.

 

(EE)

Reflects the adjustment to income tax expense for the fiscal year ended March 31, 2023, as a result of the estimated state tax impact on the other adjustments. No adjustment is reflected for the nine months ended December 31, 2023 based on LG Studios’ estimated annual effective tax rate for the fiscal year ending March 31, 2024 and LG Studios having a full valuation allowance on its net deferred tax asset.

 

(FF)

Reflects the adjustment to net loss attributable to noncontrolling interests as a result of the decrease in LG Studio’s redeemable noncontrolling interest in 3 Arts Entertainment and resulting reclassification of the remaining noncontrolling interest to other liabilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SEAC

The following discussion and analysis of the financial condition and results of operations of Screaming Eagle Acquisition Corp. (for purposes of this section, “SEAC,” “we,” “us” and “our”) should be read in conjunction with the audited financial statements and the notes related thereto which are included elsewhere in this prospectus. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. SEAC’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Overview

SEAC is a blank check company incorporated on November 3, 2021 as a Cayman Islands exempted company for the purpose of effecting an Initial Business Combination. SEAC’s efforts to identify a prospective Initial Business Combination target have not been limited to a particular industry, sector or geographic region. While SEAC may pursue an Initial Business Combination opportunity in any industry or sector, SEAC intends to capitalize on the ability of the SEAC management team to identify and combine with a business or businesses that could benefit from the SEAC management team’s established global relationships and operating experience.

On January 10, 2022, SEAC consummated the SEAC IPO of the SEAC Units and a private sale (the “Private Placement”) of the SEAC Private Placement Warrants. A total of $750,000,000 comprised of $735,000,000 of the proceeds from the SEAC IPO (which amount included $26,250,000 of the underwriters’ deferred discount) and $15,000,000 of the proceeds of the sale of the private placement warrants was placed in the Trust Account. In accordance with the terms of the Trust Agreement, the proceeds were invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations until January 2024. On January 26, 2024, SEAC amended the Trust Agreement, to permit Continental Stock Transfer & Trust Company (the “Trustee”), to hold the assets in the Trust Account in an interest-bearing demand deposit account or cash until the earlier of the consummation of an Initial Business Combination or SEAC’s liquidation. On the same day, SEAC instructed the Trustee to liquidate the investments held in the Trust Account and move the funds to an interest-bearing demand deposit account, with the Trustee continuing to act as trustee. As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the SEAC IPO and the Private Placement are no longer invested in U.S. government securities or money market funds.

SEAC intends to effectuate an Initial Business Combination, including the Business Combination, using cash from the proceeds of the SEAC IPO and the private placement of the SEAC Private Placement Warrants, the proceeds of the sale of SEAC Public Shares in connection with the Initial Business Combination, shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, other securities issuances, or a combination of the foregoing.

As indicated in the accompanying financial statements, at December 31, 2023, SEAC had an unrestricted cash balance of $999,152 as well as cash and investments held in the Trust Account of $794,750,266. Further, SEAC expects to incur significant costs in the pursuit of an Initial Business Combination. SEAC cannot assure you that its plans to complete an Initial Business Combination will be successful.

Business Combination with StudioCo

On December 22, 2023, SEAC, New SEAC, Lions Gate Parent, Studio HoldCo, StudioCo, MergerCo and New BC Sub, entered into the Business Combination Agreement, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement and the Plan of Arrangement,

 

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(i) SEAC will merge with and into MergerCo with SEAC Merger Surviving Company as the resulting entity, (ii) SEAC Merger Surviving Company will distribute all of its assets lawfully available for distribution to New SEAC by way of a cash dividend, (iii) SEAC Merger Surviving Company will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and convert to a British Columbia unlimited liability company in accordance with the applicable provisions of the BC Act, (iv) New SEAC will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and continue as a British Columbia company in accordance with the applicable provisions of the BC Act, and (v) in pursuant to an arrangement under Division 5 of Part 9 of the BC Act and on the terms and subject to the conditions set forth in the Plan of Arrangement, (A) SEAC Merger Surviving Company and New BC Sub will amalgamate to form MergerCo Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, (B) New SEAC and MergerCo Amalco will amalgamate to form SEAC Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement and (C) StudioCo and SEAC Amalco will amalgamate to form Pubco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement. The Arrangement is subject to the approval by the Supreme Court of British Columbia under the BC Act.

Lions Gate Parent’s securities are traded on the New York Stock Exchange under the ticker symbols “LGF.A” and “LGF.B”.

Results of Operations

SEAC has neither engaged in any operations nor generated any revenues to date. SEAC’s only activities since inception have been organizational activities, those necessary to prepare for the SEAC IPO and identifying and evaluating a target company for an Initial Business Combination and activities in connection with the Business Combination. SEAC will not generate any operating revenues until after completion of an Initial Business Combination, at the earliest. SEAC has generated non-operating income in the form of interest income from the proceeds derived from the SEAC IPO. SEAC is incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and other expenses in connection with completing an Initial Business Combination, including the Business Combination.

For the year ended December 31, 2023, SEAC had a net income of $16,700,633, a loss from operations of $24,446,982, comprised of general and administrative expenses of $5,649,682 and PIPE with reduction right expense of $18,797,300, and non-operating income of $41,147,615, comprised of primarily of a gain from change in fair value of warrant liability of $2,816,000, a gain from change in fair value of PIPE with reduction right liability of $544,290, and interest earned in the Trust Account of $37,787,325.

For the year ended December 31, 2022, SEAC had a net income of $22,511,785, a loss from operations of $1,628,308, comprised of general and administrative expenses of $1,628,308, and non-operating income of $24,140,093, comprised primarily of a gain from the change in fair value of warrant liability of $14,197,333 and interest earned in the Trust Account of $9,962,942 offset by offering costs allocable to private warrant liability of $20,182. For the period from November 3, 2021 (inception) through December 31, 2021, we had a net loss of $5,000, which consisted of formation and operating costs of $5,000.

Through December 31, 2023, SEAC’s efforts have been limited to organizational activities, activities relating to the SEAC IPO, activities relating to identifying and evaluating prospective acquisition candidates and activities in connection with the Business Combination and those relating to general corporate matters. SEAC has not generated any revenue, other than interest income earned on the proceeds held in the Trust Account. As of December 31, 2023, $794,750,266 was held in the Trust Account (including up to $26,250,000 of deferred underwriting discounts and commissions). SEAC had cash outside of the Trust Account of $999,152 and $3,695,499 in accounts payable and accrued expenses.

 

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Liquidity and Capital Resources

As of December 31, 2023, SEAC had an unrestricted cash balance of $999,152 as well as cash and investments held in the Trust Account of $794,750,266. SEAC’s liquidity needs through December 31, 2023 were satisfied through receipt of a $25,000 capital contribution from the SEAC Sponsor in exchange for the issuance of the SEAC Founder Shares, a $300,000 loan from the SEAC Sponsor (which was paid in full on January 11, 2022), the proceeds from the consummation of the Private Placement not held in the Trust Account and the withdrawal of certain interest earned on the Trust Account to fund SEAC’s working capital requirements in accordance with the terms of the Trust Agreement.

Further, the SEAC Sponsor or an affiliate of the SEAC Sponsor or certain of SEAC’s officers and directors may, but are not obligated to, loan SEAC funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the SEAC Private Placement Warrants. The terms of such loans have not been determined and no written agreements exist with respect to such loans. Based on the foregoing, SEAC management believes that SEAC will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of an Initial Business Combination or one year from the issuance of the financial statements.

In accordance with the terms of the SEAC Articles, SEAC has until the Deadline Date to consummate an Initial Business Combination (the “Scheduled Liquidation Date”). Although SEAC plans to complete an Initial Business Combination, including the Business Combination, before the Scheduled Liquidation Date, there can be no assurance that SEAC will be able to consummate an Initial Business Combination by the Scheduled Liquidation Date. In connection with SEAC’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” SEAC management has determined that if SEAC is unable to complete an Initial Business Combination and raise additional funds to alleviate liquidity needs and since the mandatory liquidation deadline is less than 12 months away, there is substantial doubt that SEAC will operate as a going concern.

No adjustments have been made to the carrying amounts of assets or liabilities should SEAC be required to liquidate after the Scheduled Liquidation Date. SEAC management plans to consummate an Initial Business Combination prior to the Scheduled Liquidation Date, however there can be no assurance that one will be completed.

SEAC expects its primary liquidity requirements during that period prior to the Initial Business Combination to include approximately $416,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations, $360,000 for administrative and support services, and approximately $224,000 for Nasdaq and other regulatory fees and approximately $850,000 for director and officer liability insurance premiums. SEAC will also reimburse Global Eagle Acquisition LLC (“GEA”), an affiliate of the SEAC Sponsor, for office space and administrative services provided to members of the SEAC management team in an amount not to exceed $15,000 per month in the event such space and/or services are utilized and SEAC does not pay a third party directly for such services.

These amounts are estimates and may differ materially from SEAC’s actual expenses. In addition, SEAC could use a portion of the funds not being placed in the Trust Account to pay commitment fees for financing, fees to consultants to assist SEAC with its search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although SEAC does not have any current obligation or intention to do so. If SEAC enters into an agreement for an alternative business combination where SEAC pays for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would

 

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be determined based on the terms of the specific business combination and the amount of SEAC’s available funds at the time. SEAC’s forfeiture of such funds (whether as a result of SEAC’s breach or otherwise) could result in SEAC’s not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

Moreover, SEAC may need to obtain additional financing to complete an Initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in the Trust Account or because SEAC becomes obligated to redeem a significant number of SEAC Public Shares upon completion of the business combination, in which case SEAC may issue additional securities or incur debt in connection with such business combination. In addition, SEAC intends to target businesses with enterprise values that are greater than SEAC could acquire with the net proceeds of the SEAC IPO and the sale of the SEAC Private Placement Warrants, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy any redemptions by SEAC Public Shareholders, SEAC may be required to seek additional financing to complete such proposed Initial Business Combination. SEAC may also obtain financing prior to the closing of an Initial Business Combination to fund its working capital needs and transaction costs in connection with its search for and completion of an Initial Business Combination. There is no limitation on SEAC’s ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with an Initial Business Combination, including pursuant to forward purchase agreements or backstop agreements SEAC may enter into following consummation of the SEAC IPO. Subject to compliance with applicable securities laws, SEAC would only complete such financing simultaneously with the completion of an Initial Business Combination. If SEAC is unable to complete an Initial Business Combination because SEAC does not have sufficient funds available to it, SEAC will be forced to cease operations and liquidate the Trust Account. In addition, following an Initial Business Combination, if cash on hand is insufficient, SEAC may need to obtain additional financing in order to meet its obligations.

Quantitative and Qualitative Disclosures about Market Risk

The net proceeds of the SEAC IPO and the sale of the SEAC Private Placement Warrants held in the Trust Account have been and may only be held as cash, in an interest-bearing demand deposit account, or invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, SEAC believes there will be no associated material exposure to interest rate risk.

Initial Public Offering Related Party Transactions

On November 5, 2021, the SEAC Sponsor purchased an aggregate of 17,250,000 Founder Shares in exchange for a capital contribution of $25,000, or approximately $0.0014 per share. On December 13, 2021, SEAC effected a share capitalization of 4,312,500 Founder Shares which resulted in the SEAC Sponsor holding an aggregate of 21,562,500 Founder Shares. The number of Founder Shares outstanding was determined based on the expectation that the total size of the SEAC IPO would be a maximum of 86,250,000 SEAC Units if the underwriters’ over-allotment option is exercised in full, and therefore that such Founder Shares would represent 20% of the outstanding shares after the SEAC IPO. On February 19, 2022, the 2,812,500 Founder Shares were forfeited because the underwriters did not exercise their over-allotment option resulting in the SEAC Sponsor holding 18,750,000 Founder Shares.

The SEAC Sponsor purchased an aggregate of 11,733,333 SEAC Private Placement Warrants, at a price of $1.50 per warrant, or $17,600,000 in the aggregate, in a Private Placement that closed simultaneously with the closing of the SEAC IPO. Each SEAC Private Placement Warrant entitles the holder to purchase one SEAC Class A Ordinary Share at $11.50 per share. The SEAC Private Placement Warrants are identical to the SEAC Public Warrants, except that (i) the SEAC Private Placement Warrants will not be redeemable by SEAC, (ii) the SEAC Private Placement Warrants and the SEAC Class A Ordinary Shares issuable upon the exercise of the SEAC

 

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Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination, subject to certain limited exceptions, (iii) the SEAC Private Placement Warrants will be exercisable on a cashless basis, (iv) will use a different Black-Scholes Warrant Model for purposes of calculating the Black-Scholes Warrant Value (as defined in the Warrant Agreement relating to the warrants) and (v) the SEAC Private Placement Warrants and the SEAC Class A Ordinary Shares issuable upon exercise of the SEAC Private Placement Warrants will be entitled to registration rights. If the SEAC Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the SEAC Private Placement Warrants will be redeemable by SEAC and exercisable by such holders on the same basis as the SEAC Public Warrants.

There will be no finder’s fees, reimbursements, consulting fees or other compensation paid by SEAC to the SEAC Sponsor, officers or directors, or any of their affiliates, for services rendered to SEAC prior to, or in connection with, an Initial Business Combination (regardless of the type of transaction that it is) other than as described below. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. SEAC’s audit committee will review on a quarterly basis all payments that were made to the SEAC Sponsor, officers, directors or their affiliates.

SEAC currently maintains its executive offices at 955 Fifth Avenue, New York, NY, 10075 from GEA, an affiliate of the SEAC Sponsor. In accordance with the terms of the Administrative Services and Indemnification Agreement , SEAC reimburses GEA for office space and administrative services provided to members of the SEAC management team in an amount not exceeding $15,000 per month. Upon completion of an Initial Business Combination or SEAC’s liquidation, SEAC will cease paying these monthly fees.

SEAC has agreed, pursuant to the Administrative Services and Indemnification Agreement with the SEAC Sponsor and GEA relating to the monthly reimbursement for office space and administrative services described above, that SEAC will indemnify the SEAC Sponsor from any claims arising out of or relating to the SEAC IPO or operations or conduct of SEAC’s business (including an Initial Business Combination) or any claim against the SEAC Sponsor alleging any expressed or implied management or endorsement by the SEAC Sponsor or any of activities or any express or implied association between the SEAC Sponsor and SEAC or any of its affiliates, which agreement provides that the indemnified parties cannot access the funds held in the Trust Account.

On November 5, 2021, SEAC issued the promissory note to the SEAC Sponsor, pursuant to which SEAC could borrow up to an aggregate principal amount of $300,000 (the “Promissory Note”). The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2022 or (ii) the completion of the SEAC IPO. On January 11, 2022, the amount outstanding under the Promissory Note was repaid in full, and borrowings under the Promissory Note are no longer available.

In addition, in order to finance transaction costs in connection with an intended Initial Business Combination, the SEAC Sponsor or an affiliate of the SEAC Sponsor or certain of SEAC’s officers and directors may, but are not obligated to, loan SEAC funds as may be required on a non-interest basis. If SEAC completes an Initial Business Combination, SEAC would repay such loaned amounts. In the event that an Initial Business Combination does not close, SEAC may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Such loans may be convertible into private placement warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the SEAC Private Placement Warrants. Except as set forth above, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of an Initial Business Combination, SEAC does not expect to seek loans from parties other than the SEAC Sponsor or an affiliate of the SEAC Sponsor as SEAC does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account.

 

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Any of the foregoing payments to GEA, repayments of loans from the SEAC Sponsor or repayments of working capital loans prior to an Initial Business Combination will be made using funds held outside the Trust Account and may be made from interest earned on the Trust Account and released to SEAC to fund its working capital requirements (subject to an aggregate limit of $3,000,000).

After the Initial Business Combination, members of the SEAC management team who remain with SEAC may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to SEAC Shareholders, to the extent then known, in the proxy solicitation or tender offer materials, as applicable, furnished to SEAC Shareholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a general meeting held to consider the Initial Business Combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.

Commitments and Contractual Obligations

As of December 31, 2023, SEAC does not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. No audited yearly operating data is included in this prospectus as we have not conducted any operations to date.

Administrative Services and Indemnification Fee

On January 5, 2022, SEAC entered into an Administrative Services and Indemnification Agreement with the SEAC Sponsor and GEA. SEAC agreed to pay GEA, an affiliate of the SEAC Sponsor, $15,000 per month for office space, utilities, secretarial and administrative support services and to provide indemnification to the SEAC Sponsor from any claims arising out of or relating to the SEAC IPO or SEAC’s operations or conduct of SEAC’s business (including its Initial Business Combination) or any claim against the SEAC Sponsor alleging any expressed or implied management or endorsement by the SEAC Sponsor of any of SEAC’s activities or any express or implied association between the SEAC Sponsor and SEAC or any of its affiliates. Upon completion of a business combination or SEAC’s liquidation, we will cease paying these monthly fees. In the years ended December 31, 2023 and 2022, and the period from November 3, 2021 (inception) to December 31, 2021, SEAC incurred $180,000, $180,000 and $0, respectively, in administrative services expenses under the arrangement. As of December 31, 2023 and 2022, $45,000 and $45,000, respectively, is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Underwriting Agreement

On January 5, 2022, SEAC entered into the Underwriting Agreement. The SEAC IPO Underwriters were paid a cash underwriting discount of two percent (2.0%) of the gross proceeds of the SEAC IPO, or $15,000,000. Additionally, the SEAC IPO Underwriters were entitled to a deferred underwriting commission of 3.5% or $26,250,000 of the gross proceeds of the SEAC IPO held in the Trust Account upon the completion of SEAC’s Initial Business Combination subject to the terms of the Underwriting Agreement. The deferred underwriting commissions will become payable to the underwriters from the amounts held in the Trust Account solely in the event that SEAC completes an Initial Business Combination, subject to the terms of the Underwriting Agreement.

In consideration of Citi’s engagement as SEAC’s financial advisor and placement agent in the PIPE financing raised in connection with the Business Combination, and the fees it is expected to receive in connection with such roles (as more fully described in the subsection entitled “The Business Combination – Certain Engagements in Connection with the Business Combination and Related Transactions”), on January 3, 2024, Citi agreed to make adjustments to its entitlement to a portion of the $26,250,000 deferred underwriting fee payable to it pursuant to the Underwriting Agreement Such adjustments modified Citi’s entitlement to its portion of the deferred underwriting fee to be equal to a specific percentage of the amount remaining in the Trust Account, after giving effect to the redemption rights exercised by the SEAC Public Shareholders and certain other adjustments.

 

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The aggregate fees payable to Citi upon the closing of the Business Combination is expected to be approximately $7.6 million, comprising of approximately $3.2 million as the modified deferred underwriting commission to which Citi is entitled equal to a specific percentage of the amount remaining in the Trust Account at Closing, which, for illustrative purposes, is presented here assuming $184.4 million remains in the Trust Account at Closing and after giving effect to redemption rights exercised by the SEAC Public Shareholders and certain other adjustments (as described in the section “Business of SEAC and Certain Information About SEAC – Modifications to the SEAC IPO Underwriters’ Deferred Discount”), approximately $3.4 million for its role as co-placement agent and $1.0 million for its role as SEAC’s financial advisor.

In addition, on January 3, 2024, SEAC received a letter from GS whereby GS waived its entitlement to any portion of the $26,250,000 deferred underwriting fee payable pursuant to the Underwriting Agreement. SEAC did not seek out the reasons why GS waived its deferred underwriting fee, despite GS having already completed its services under the Underwriting Agreement. GS received no additional consideration for the waiver of its entitlement to the deferred underwriting fee. There is no dispute among any of the parties to the Business Combination with respect to the services provided or the resignation of GS. While GS did not participate in any aspect of the Business Combination and SEAC has no other contractual relationship with GS, investors should be aware that the waiver of a deferred underwriting fee is unusual. GS did not affirmatively disclaim responsibility for any of the disclosure in this prospectus. See the risk factor entitled “Goldman Sachs & Co. LLC (“GS”), a representative of the underwriters in SEAC IPO, was to be compensated in part on a deferred basis for already-rendered underwriting services in connection with SEAC IPO, yet GS, without any consideration from SEAC or Lionsgate, gratuitously waived its entitlement to such compensation. While GS did not participate in any aspect of the Business Combination and SEAC has no other contractual relationship with GS, investors should be aware that the waiver of a deferred underwriting fee is unusual.”

In addition, although GS waived its entitlement to any deferred underwriting fee payable to it pursuant to the Underwriting Agreement, certain provisions of the Underwriting Agreement were not waived by GS. In particular, GS did not waive its rights to indemnification and contribution under the Underwriting Agreement. As a result, if any claims, litigation, disputes or other legal proceedings are brought by third parties against any of the SEAC IPO Underwriters in relation to its services provided under the Underwriting Agreement, then SEAC (and Pubco after the Closing) may be liable to pay for or reimburse the SEAC IPO Underwriters for such losses and costs it incurs, subject to the limitations set forth in the Underwriting Agreement. In addition, the Underwriting Agreement described above contains a contribution provision in the event that the indemnity obligations are unavailable or insufficient to hold harmless an indemnified party; however, no SEAC IPO Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the offered securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay. Therefore, there can be no assurance that SEAC (or PubCo after the Closing) would have sufficient funds to satisfy such indemnification claims.

Business Combination Agreement and Related Agreements

Business Combination Agreement

On December 22, 2023, SEAC, New SEAC, Lions Gate Parent, Studio HoldCo, StudioCo, MergerCo and New BC Sub, entered into the Business Combination Agreement, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement and the Plan of Arrangement, (i) the Company will merge with and into MergerCo with SEAC Merger Surviving Company as the resulting entity, (ii) SEAC Merger Surviving Company will distribute all of its assets lawfully available for distribution to New SEAC by way of a cash dividend, (iii) SEAC Merger Surviving Company will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and convert to a British Columbia unlimited liability company in accordance with the applicable provisions of the BC Act, (iv) New SEAC will transfer by way of continuation from the Cayman Islands to British Columbia in accordance

 

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with the Companies Act and the BC Act and continue as a British Columbia company in accordance with the applicable provisions of the BC Act, and (v) in pursuant to the Arrangement and on the terms and subject to the conditions set forth in the Plan of Arrangement, (A) SEAC Merger Surviving Company and New BC Sub will amalgamate to form MergerCo Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, (B) New SEAC and MergerCo Amalco will amalgamate to form SEAC Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement and (C) StudioCo and SEAC Amalco will amalgamate to form Pubco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement. The Arrangement is subject to the approval by the Supreme Court of British Columbia under the BC Act.

See “The Business Combination” above and “Certain Relationships and Related Transactions” for additional information.

PIPE Subscription Agreements

Concurrently with the execution of the Business Combination Agreement, SEAC, New SEAC and Lions Gate Parent entered into the Initial Subscription Agreements with certain PIPE Investors pursuant to which such PIPE Investors have agreed, subject to the terms and conditions set forth therein, to subscribe for and purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 18,172,378 Pubco Common Shares, at a purchase price of $9.63 per share, for an aggregate cash amount of $175,000,000.

Pursuant to the Initial Subscription Agreements, such PIPE Investors may elect to offset its total commitment under its Subscription Agreement, on a one-for-one basis, up to the total amount of PIPE Shares subscribed thereunder, to the extent such PIPE Investor (i) purchases SEAC Class A Ordinary Shares in open market transactions at a price of less than the Closing redemption price per-share prior to the record date established for voting at the SEAC Shareholders’ Meeting, but only if the PIPE Investor agrees, with respect to such Open-Market Purchase Shares, to (A) not sell or transfer any such Open-Market Purchase Shares prior to the Closing (B) not vote any such Open-Market Purchase Shares in favor of approving the Business Combination and instead submits a proxy abstaining from voting thereon and (C) to the extent such investor has the right to have all or some of its Open-Market Purchase Shares redeemed for cash in connection with the Closing, not exercise any such redemption rights; and (ii) beneficially owned any SEAC Class A Ordinary Shares as of the date of its Subscription Agreement, but only if the PIPE Investor agrees, with respect to such Currently Owned Shares, to (A) not to sell or transfer and such Currently Owned Shares prior to the Closing, (B) vote all of its Currently Owned Shares in favor of approving the Business Combination at the SEAC Shareholders’ Meeting, and (C) to the extent such investor has the right to have all or some of its Currently Owned Shares redeemed for cash in connection with the Closing, not exercise any such redemption rights.

If such PIPE Investor exercises its Reduction Right and meets the foregoing conditions, then for every SEAC Class A Ordinary Share for which such PIPE Investor exercises its Reduction Right, such PIPE Investor will be entitled to purchase from SEAC 0.1111 newly issued SEAC Class A Ordinary Shares, at a purchase price of $0.0001 per share, which shares will be issued by SEAC prior to the SEAC Merger.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires SEAC management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income expenses during the period reported. Actual results could materially differ from those estimates. SEAC has identified the following critical accounting policies;

 

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Warrant liability

SEAC accounts for the SEAC Private Placement Warrants as liabilities at fair value on the consolidated balance sheets. The SEAC Private Placement Warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the consolidated statements of operations. SEAC will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the SEAC Private Placement Warrants. At that time, the portion of the warrant liability related to the SEAC Private Placement Warrants will be reclassified to additional paid-in capital. This accounting estimate is subject to uncertainty given there is significant judgment in certain inputs, such as implied volatility and the probability of completing the Business Combination or a different business combination. Any changes in the inputs could have a significant impact on the results of operations. For the years ended December 31, 2023 and 2022, SEAC recognized a gain resulting from a decrease in the fair value of the SEAC Private Placement Warrants of $2,816,000 and $14,197,333, respectively. These gains are presented as a change in fair value of warrant liability in other income in the accompanying consolidated statements of operations.

PIPE with reduction right liability

SEAC accounts for the Subscription Agreements as a liability at fair value on the consolidated balance sheets (the “PIPE with reduction right liability”). The Subscription Agreements are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the consolidated statements of operations. SEAC will continue to adjust the liability for changes in fair value until the earlier of the closing of the transactions contemplated by the Subscription Agreements or expiration of the Subscription Agreements. At that time, the PIPE with reduction right liability will be reclassified to additional paid-in capital. This accounting estimate is subject to uncertainty given there is significant judgment in certain inputs, such as the probability of completing the Business Combination. Any changes in the inputs could have a significant impact on the results of operations. For the year ended December 31, 2023, SEAC recorded a PIPE with reduction right expense of $18,797,300 in loss from operations and a gain resulting from a decrease in the fair value of the PIPE with reduction right liability of $544,290. This gain is presented as a change in fair value of PIPE with reduction right liability in other income in the accompanying consolidated statement of operations.

Recent Developments

On April 9, 2024, SEAC held an Extension Meeting, where the SEAC Shareholders voted and approved amendments to the SEAC IPO Articles, which (i) extended the Deadline Date from April 10, 2024 to June 15, 2024, (ii) eliminated the limitation that SEAC may not redeem SEAC Public Shares in an amount that would cause SEAC’s net tangible assets to be less than $5,000,001 in connection with the Initial Business Combination, and (iii) provided the holders of SEAC Class B Ordinary Shares the right to convert their SEAC Class B Ordinary Shares into SEAC Class A Ordinary Shares on a one-for-one basis prior to the closing of an Initial Business Combination at the election of the holder. These amendments took effect on April 9, 2024, upon the approval by the SEAC Shareholders at the Extension Meeting.

In connection with the Extension Meeting, a total of 57,824,777 SEAC Public Shares, representing an aggregate of approximately $620.8 million, were presented for redemption. As a result, as of April 10, 2024, after the satisfaction of such redemptions, the balance in SEAC’s Trust Account is expected to be approximately $184.4 million.

On April 11, 2024, SEAC, New SEAC and Lions Gate Parent entered into an Additional Subscription Agreement, pursuant to which an additional PIPE Investor agreed to purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 4,918,839 Pubco Common Shares, at a purchase price of $10.165 per share, for an aggregate cash amount of $50,000,000.

 

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Also on April 11, 2024 SEAC, New SEAC, MergerCo, New BC Sub, Lions Gate Parent, Studio HoldCo and StudioCo entered into Amendment No.1 in order to, among other things, (i) remove the provisions requiring nonredeeming SEAC Public Shareholders to receive a mix of cash and stock consideration in the Business Combination in the event that non-redemptions of SEAC Public Shares at the Closing would have otherwise diluted Lions Gate Parent’s ownership in the combined company, such that SEAC Public Shareholders who do not redeem receive only stock of the combined company and (ii) amend the closing condition requiring Aggregate Transaction Proceeds to equal $350,000,000, with a minimum of $175,000,000 required to be in the Trust Account (which may be reduced dollar-for-dollar by any additional PIPE Investment Amount above $175,000,000) to instead require aggregate transactions proceeds to be no less than $350,000,000 and no greater than $409,500,000, with a minimum of $125,000,000 required to be in the Trust Account (which may be reduced dollar-for-dollar by any additional PIPE Investment Amount above $225,000,000).

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE STUDIO BUSINESS OF LIONS GATE ENTERTAINMENT CORP.

The following management’s discussion and analysis of financial condition and results of operations reflects the combined financial statements of the Studio Business, which were prepared on a “carve-out” basis and derived from Lions Gate Entertainment Corp’s consolidated financial statements and accounting records. This discussion should be read together with the combined financial statements and related notes of the Studio Business that are included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. The Studio Business’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors” or in other parts of this prospectus. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Overview

The Studio Business (the “Company,” “Studio,” “we,” “us,” or “our”) is substantially reflective of Lions Gate Entertainment Corp’s (“Lionsgate” or “Lions Gate Parent”) Motion Picture and Television Production segments together with a substantial portion of Lionsgate’s corporate general and administrative costs. Studio’s world-class motion picture and television studio operations bring a unique and varied portfolio of entertainment to consumers around the world.

The Motion Picture segment consists of the development and production of feature films, acquisition of North American and worldwide distribution rights, North American theatrical, home entertainment and television distribution of feature films produced and acquired, and worldwide licensing of distribution rights to feature films produced and acquired. The Television Production segment consists of the development, production and worldwide distribution of television productions including television series, television movies and mini-series, and non-fiction programming. The Motion Picture segment includes the licensing of motion pictures and the Television Production segment includes the licensing of Starz original productions to the STARZ-branded premium global subscription platforms (the “Starz Business”). The Television Production segment also includes the ancillary market distribution of Starz original productions and licensed product. Additionally, the Television Production segment includes the results of operations of 3 Arts Entertainment, a talent management company.

The Studio Business manages and reports its operating results through two reportable business segments, Motion Picture and Television Production, as further discussed below.

Background and Proposed Business Combination

As described in Note 2 to the unaudited interim condensed combined financial statements of the Studio Business of Lions Gate Entertainment Corp. included elsewhere in this prospectus, on December 22, 2023, Lionsgate, SEAC, New SEAC, SEAC MergerCo, 1455941 B.C. Unlimited, LG Sirius Holdings and StudioCo entered into a business combination agreement pursuant to which the Studio Business will be combined with Screaming Eagle through a series of transactions, including an amalgamation of StudioCo and New SEAC under a Canadian plan of arrangement (the “Business Combination”). Upon consummation of the Business Combination, between approximately 85.7% and 87.3% of the total shares of the Studio Business are expected to continue to be held indirectly by Lionsgate, while SEAC Public Shareholders and founders and common equity financing investors are expected to own an aggregate of between approximately 14.3% and 12.7% of the combined company. In addition to establishing the Studio Business as a standalone publicly-traded entity, the transaction is expected to deliver between approximately $350 million and $409,500,000 of gross proceeds to Lionsgate, including $225 million in private investments in public equities (“PIPE”) financing.

The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). Under this method of accounting,

 

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SEAC will be treated as the acquired company and the Studio Business will be treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of New SEAC will represent a continuation of the financial statements of the Studio Business, with the Business Combination treated as the equivalent of the Studio Business issuing stock for the historical net assets of SEAC, accompanied by a recapitalization. The net assets of SEAC will be stated at fair value, which approximates historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of the Studio Business.

As a consequence of the Business Combination, the Studio Business will become the successor to an SEC- registered and Nasdaq-listed company. In connection with the Business Combination, the Studio Business and Lionsgate will enter into a shared-services arrangement and an intercompany debt arrangement, among other agreements. The shared-services arrangement is expected to reflect substantially all of Lionsgate’s corporate general and administrative functions and costs remaining with the Studio Business, as further discussed below. The intercompany debt arrangement will provide that the outstanding obligations and debt service requirements (principal and interest payments) of the Studio Business will remain substantially the same as under Lionsgate’s Senior Credit Facilities, as described and defined below. In addition, the terms of Lionsgate’s interest rate swap arrangements will be transferred to the Studio Business. However, the Studio Business’s availability under the Lionsgate revolving credit facility will be $1.1 billion, reduced from Lionsgate’s total availability of $1.25 billion, such that a portion of the borrowing capacity is allocated to Lionsgate’s Starz entities. The terms of such intercompany debt arrangement are subject to change and may not ultimately be comparable with the Senior Credit Facilities.

Basis of Presentation

This prospectus includes historical audited combined financial statements of the Studio Business, which were prepared on a “carve-out” basis and derived from Lionsgate’s consolidated financial statements and accounting records. These combined financial statements reflect the Studio Business’s combined historical financial position, results of operations and cash flows as they were historically managed in accordance with U.S. GAAP. The combined financial statements may not be indicative of the Studio Business’s future performance and do not necessarily reflect what the financial position, results of operations and cash flows would have been had the Studio Business operated as an independent, publicly traded company during the periods presented.

The Studio Business has historically operated as part of Lionsgate and not as a standalone company. The Studio Business combined financial statements, representing the historical assets, liabilities, operations and cash flows of the combination of the operations making up the worldwide Studio Business, have been derived from the separate historical accounting records maintained by Lionsgate, and are presented on a carve-out basis. These combined financial statements reflect the combined historical results of operations, financial position, comprehensive income (loss) and cash flows of the Studio Business for the periods presented as historically managed within Lionsgate through the use of a management approach in identifying the Studio Business’s operations. In using the management approach, considerations over how the business operates were utilized to identify historical operations that should be presented within the carve-out financial statements. This approach was taken due to the historical organizational structure of certain legal entities comprising the Studio Business.

All revenues and costs as well as assets and liabilities directly associated with the business activity of the Studio Business are included in the combined financial statements included elsewhere in this prospectus. Revenues and costs associated with the Studio Business are specifically identifiable in the accounting records maintained by Lionsgate and primarily represent the revenue and costs used for the determination of segment profit of the Motion Picture and Television Production segments of Lionsgate. In addition, the Studio Business costs include an allocation of corporate general and administrative expense (inclusive of share-based compensation) which has been allocated to the Studio Business as further discussed below. Other costs excluded from the Motion Picture and Television Production segment profit but relating to the Studio Business are generally specifically identifiable as costs of the Studio Business in the accounting records of Lionsgate and are included in the accompanying combined financial statements.

 

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Lionsgate utilizes a centralized approach to cash management. Cash generated by the Studio Business is managed by Lionsgate’s centralized treasury function and cash is routinely transferred to the Studio Business or the Starz Business to fund operating activities when needed. Cash and cash equivalents of the Studio Business are reflected in the combined balance sheets. Payables to and receivables from Lionsgate, primarily related to the Starz Business, are often settled through movement to the intercompany accounts between Lionsgate, the Starz Business and the Studio Business. Other than certain specific balances related to unsettled payables or receivables, the intercompany balances between the Studio Business and Lionsgate have been accounted for as parent net investment. See Note 20 to the audited combined financial statements and Note 18 to the unaudited interim condensed combined financial statements of the Studio Business of Lions Gate Entertainment Corp. included elsewhere in this prospectus.

The Studio Business is the primary borrower of certain corporate indebtedness (the Revolving Credit Facility, Term Loan A and Term Loan B, together referred to as the “Senior Credit Facilities”) of Lionsgate. The Senior Credit Facilities are generally used as a method of financing Lionsgate’s operations in totality and are not specifically identifiable to the Studio Business or the Starz Business. It is not practical to determine what the capital structure would have been historically for the Studio Business as a standalone company, however, Lionsgate’s Senior Credit Facilities and related interest expense are reflected in the Studio Business’s combined financial statements. A portion of Lionsgate’s corporate debt, Lionsgate’s 5.500% senior notes due April 15, 2029 and related interest expense are not reflected in the Studio Business’s combined financial statements, as such Senior Notes were issued by a Starz Business entity. The Studio Business remains a guarantor under the Senior Notes indenture agreement. As described above, it is expected that the intercompany debt arrangement will provide that the outstanding obligations and debt service requirements (principal and interest payments) of the Studio Business will remain substantially the same as under Lionsgate’s Senior Credit Facilities. In addition, the terms of Lionsgate’s interest rate swap arrangements will be transferred to the Studio Business. However, the Studio Business’s availability under the Lionsgate revolving credit facility will be $1.1 billion, reduced from Lionsgate’s total availability of $1.25 billion, such that a portion of the borrowing capacity is allocated to Lionsgate’s Starz entities. The terms of such intercompany debt arrangement are subject to change and may not ultimately be comparable with the Senior Credit Facilities. See Note 7 to the audited combined financial statements and Note 6 to the unaudited interim condensed combined financial statements of the Studio Business of Lions Gate Entertainment Corp. included elsewhere in this prospectus and the “Liquidity and Capital Resources” section further below.

Additional indebtedness directly related to the Studio Business including production loans, borrowings under the Production Tax Credit Facility, IP Credit Facility, and Backlog Facility (each as defined below) and other obligations are reflected in the Studio Business combined financial statements. See Note 8 to the audited combined financial statements and Note 7 to the unaudited interim condensed combined financial statements of the Studio Business of Lions Gate Entertainment Corp. included elsewhere in this prospectus.

Lionsgate’s corporate general and administrative functions and costs, which will primarily be retained within the Studio Business through shared services agreements, as described below, have historically provided oversight over both the Starz Business and the Studio Business. These functions and costs include, but are not limited to, salaries and wages for certain executives and other corporate officers related to executive oversight, investor relations costs, costs for the maintenance of corporate facilities, and other common administrative support functions, including corporate accounting, finance and financial reporting, audit and tax costs, corporate and other legal support functions, and certain information technology and human resources expense. Accordingly, the audited combined financial statements and unaudited interim condensed combined financial statements of the Studio Business, included elsewhere in this prospectus, include allocations of certain general and administrative expenses (inclusive of share-based compensation) from Lionsgate related to these corporate and shared service functions historically provided by Lionsgate. These expenses have been allocated to the Studio Business on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of consolidated Lionsgate revenue, payroll expense or other measures considered to be a reasonable reflection of the historical utilization levels of these services. Accordingly, the Studio Business financial statements may not

 

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necessarily be indicative of the conditions that would have existed or the results of operations if the Studio Business had been operated as an unaffiliated entity, and may not be indicative of the expenses that the Studio Business will incur in the future. Further, following the Business Combination, a shared-services arrangement will reflect substantially all of Lionsgate’s corporate general and administrative function and costs remaining with the Studio Business. See “Certain Relationships and Related Transactions-StudioCo Relationships and Related Party Transactions-Shared Services Agreement/Overhead Sharing Agreement.”

The Studio Business also pays certain costs on behalf of the Starz Business such as certain rent expense, employee benefits, insurance and other administrative operating costs which are reflected as expenses of the Starz Business. The Starz Business also pays certain costs on behalf of the Studio Business such as legal expenses, software development costs and severance which are reflected as expenses of the Studio Business. The settlement of reimbursable expenses between the Studio Business and the Starz Business have been accounted for as parent net investment. See Note 20 to the audited combined financial statements and Note 18 to the unaudited interim condensed combined financial statements of the Studio Business of Lions Gate Entertainment Corp. included elsewhere in this prospectus.

Management believes the assumptions underlying the combined financial statements, including the assumptions regarding the allocation of general and administrative expenses from Lionsgate to the Studio Business, are reasonable. However, as mentioned above, the allocations may not include all of the actual expenses that would have been incurred by the Studio Business and may not reflect its combined results of operations, financial position and cash flows had it been a standalone company during the periods presented. It is not practicable to estimate actual costs that would have been incurred had the Studio Business been a standalone company and operated as an unaffiliated entity during the periods presented. Actual costs that might have been incurred had the Studio Business been a standalone company would depend on a number of factors, including the organizational structure, what corporate functions the Studio Business might have performed directly or outsourced, and strategic decisions the Studio Business might have made in areas such as executive management, legal and other professional services, and certain corporate overhead functions. See “Components of Results of Operations – Expenses” below, Note 20 to our audited combined financial statements and Note 18 to our unaudited interim condensed combined financial statements for further detail of the allocations included in the Studio Business combined financial statements included elsewhere in this prospectus.

Components of Results of Operations

Revenues

Our revenues are derived from the Motion Picture and Television Production segments, as described below. As mentioned above, we refer to our Motion Picture and Television Production segments collectively as our Studio Business. Our revenues are derived from the U.S., Canada, the United Kingdom and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the years ended March 31, 2023, 2022 and 2021 or for the nine months ended December 31, 2023 and 2022.

Motion Picture: Our Motion Picture segment includes revenues derived from the following:

 

   

Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results.

 

   

Home Entertainment. Home entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on packaged media and through digital media platforms (including pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). In addition,

 

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we have revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis.

 

   

Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the linear pay, basic cable and free television markets. In addition, when a license in our traditional pay television window is made to a subscription video-on-demand or other digital platform, the revenues are included here.

 

   

International. International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; and (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.

 

   

Other. Other revenues are derived from, among others, the licensing of our film and television and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets.

Television Production: Our Television Production segment includes revenues derived from the following:

 

   

Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and syndication) of scripted and unscripted series, television movies, mini-series and non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which we earn advertising revenue from the exploitation of certain content on television networks. Television revenues also include revenue from licenses to subscription-video-on-demand platforms in which the initial license of a television series is to a subscription video-on-demand platform.

 

   

International. International revenues are derived from the licensing and syndication to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming.

 

   

Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series on packaged media and through digital media platforms.

 

   

Other. Other revenues are derived from, among others, the licensing of our television programs to other ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and from commissions and executive producer fees earned related to talent management.

Expenses

Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses.

Direct operating expenses include amortization of film and television production or acquisition costs, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses.

Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild - American Federation of Television and Radio Artists, Directors Guild of America, and Writers Guild of America, based on the performance of the film or television program in certain ancillary markets or based on the individual’s (i.e., actor, director, writer) salary level in the television market.

Distribution and marketing expenses primarily include the costs of theatrical prints and advertising (“P&A”) and premium video-on-demand (“Premium VOD”) expense and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and

 

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marketing cost associated with the theatrical release of the picture. Premium VOD expense represents the advertising and marketing cost associated with the Premium VOD release of the picture. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising.

General and administration expenses include salaries and other overhead and include allocations for certain general and administrative expenses from Lionsgate related to certain corporate and shared service functions historically provided by Lionsgate, including, but not limited to, executive oversight, investor relations, accounting, tax, legal, human resources, occupancy, and other shared services. See “Basis of Presentation” above, Note 1 and Note 20 to our audited combined financial statements and Note 1 and Note 18 to our unaudited interim condensed combined financial statements for further details on our methodology for allocating these costs. Allocations of expenses from Lionsgate are not necessarily indicative of future expenses and do not necessarily reflect results that would have been achieved by the Studio Business as an independent, publicly traded company for the periods presented. Lionsgate’s corporate and shared service function expense and the allocation reflected in the Studio Business’s audited combined financial statements and unaudited interim condensed combined financial statements is presented in the table below:

 

     Nine Months Ended
December 31,
     Year Ended March 31,  
     2023      2022      2023      2022      2021  
              
     (Amounts in millions)  

Lionsgate corporate general and administrative expenses:

              

Lionsgate corporate general and administrative expenses, excluding share-based compensation

   $ 94.2      $ 69.4      $ 122.6      $ 97.1      $ 113.7  

Share-based compensation

     16.6        24.1        36.3        27.4        24.9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Lionsgate corporate general and administrative expenses

   $ 110.8      $ 93.5      $ 158.9      $ 124.5      $ 138.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Allocation to the Studio Business

              

General and administrative expenses, excluding allocation of Lionsgate corporate and shared employee share-based compensation expense

   $ 76.2      $ 57.7      $ 100.8      $ 80.0      $ 91.4  

Allocation of shared employee share-based compensation expense

     12.1        17.0        26.7        19.6        18.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total allocation to the Studio Business

   $ 88.3      $ 74.7      $ 127.5      $ 99.6      $ 109.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Recurring standalone costs may be higher than historical allocations as the corporate general and administrative functions will remain at the Studio Business following the Business Combination, which may have an impact on profitability and operating cash flows. See “Basis of Presentation” above for more information.

Acquisition of eOne

On December 27, 2023, Lionsgate and its subsidiaries, Lions Gate Entertainment Inc., a Delaware corporation (“LGEI”), and Lions Gate International Motion Pictures S.à.r.l., a Luxembourg société à responsabilité limitée (“LGIMP” and, with Lionsgate and LGEI, collectively the “Buyers”), completed the previously announced acquisition of all of the issued and outstanding equity interests of the companies constituting the Entertainment One television and film (“eOne”) business from Hasbro, Inc., a Rhode Island corporation (“Hasbro”), pursuant to that certain Equity Purchase Agreement (the “Purchase Agreement”) dated August 3, 2023. The aggregate cash purchase price was approximately $375.0 million, subject to certain purchase price adjustments, including for cash, debt, and working capital. Upon closing, the Company paid $331.0 million,

 

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net of cash acquired of $54.1 million, which reflects the purchase price of $375.0 million adjusted for estimated cash, debt, transaction costs and working capital. The preliminary purchase price is subject to further adjustments based on the final determination of the purchase price adjustments. The acquisition of eOne, a film and television production and distribution company, builds the Company’s film and television library, strengthens the Company’s scripted and unscripted television business, and continues to expand the Company’s presence in Canada and the U.K.

The acquisition was accounted for under the acquisition method of accounting, with the financial results of eOne included in the Studio Business’s combined results from December 27, 2023. There was no material revenue or net income from eOne for the period from December 27, 2023 through December 31, 2023. The Studio Business incurred approximately $8.8 million of acquisition-related costs that were expensed in restructuring and other during the nine months ended December 31, 2023.

The audited combined financial statements of eOne as of December 25, 2022 and December 26, 2021 and for the fiscal years ended December 25, 2022 and December 26, 2021 and the unaudited condensed combined

financial statements of eOne as of October 1, 2023 and for the nine months ended October 1, 2023 and September 25, 2022 included elsewhere in this prospectus present the results of operations of eOne prior to the Studio Business’s acquisition.

eOne revenues for the nine months ended October 1, 2023 was $419.3 million, as compared to $518.2 million for the nine months ended September 25, 2022. The decrease in revenues was driven by lower scripted and unscripted television deliveries, as well as lower film releases and/ or sales in the 2023 period compared to the 2022 period. These decreases were due primarily to the impact of the several months-long worker strikes by the Writers Guild of America and the American actors’ union, SAG-AFTRA, which disrupted the number and timing of planned program productions.

See Note 2 to the Studio Business’s unaudited interim condensed combined financial statements for further information.

Industry Strikes

On May 1, 2023, the collective bargaining agreement between the Writers Guild of America (“WGA”) and the Alliance of Motion Picture and Television Producers (“AMPTP”) expired, and on May 2, 2023, the WGA commenced an industry-wide strike. Subsequently, on September 25, 2023, WGA members voted in favor ratifying a new three-year contract, commencing September 25, 2023 and ending May 1, 2026.

On July 12, 2023, the collective bargaining agreement between the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) and the AMPTP expired, and on July 14, 2023, the SAG-AFTRA commenced an industry-wide strike. Subsequently, on November 9, 2023, the national board of SAG-AFTRA approved an agreement reached on November 8, 2023 between SAG-AFTRA and the AMPTP to end the strike, and SAG-AFTRA union members ratified it shortly thereafter.

We paused certain theatrical and television productions as a result of the strikes. Consequently, the timing of certain production payments were delayed until productions resume and may increase the variability in payments for investment in film and television programs in future periods. In addition, the pausing and restarting of productions resulted in incremental costs, delayed the completion and release of some of our content (investment in films and television programs) and may have been the cause of impairments of our investment in film and television programs due to the cancellation of certain television shows.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are more fully described in Note 1 to our audited combined financial statements. As disclosed in Note 1 to our audited combined financial statements, the preparation of our financial statements in

 

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conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. The application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. As described more fully below, these estimates bear the risk of change due to the inherent uncertainty of the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

Accounting for Films and Television Programs

Capitalized costs for films or television programs are predominantly monetized individually.

Amortization. Film cost amortization as well as participations and residuals expense are based on management’s estimates. Costs of acquiring and producing films and television programs and of acquired libraries are amortized and estimated liabilities for participations and residuals costs are accrued using the individual-film-forecast method, based on the ratio of the current period’s revenues to management’s estimated remaining total gross revenues to be earned (“ultimate revenue”). Management’s judgment is required in estimating ultimate revenue and the costs to be incurred throughout the life of each film or television program.

Management estimates ultimate revenues based on historical experience with similar titles or the title genre, the general public appeal of the cast, audience test results when available, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change.

For motion pictures, ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. The most sensitive factor affecting our estimate of ultimate revenues for a film intended for theatrical release is the film’s theatrical performance, as subsequent revenues from the licensing and sale in other markets have historically been highly correlated to its theatrical performance. After a film’s release, our estimates of revenue from succeeding markets are revised based on historical relationships and an analysis of current market trends.

For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. The most sensitive factors affecting our estimate of ultimate revenues for a television series is whether the series will be ordered for a subsequent season and estimates of revenue in secondary markets other than the initial license fee, which depend on a number of factors, including, among others, the ratings or viewership the program achieves on the customers’ platforms. The initial estimate of ultimate revenue may include estimates of revenues outside of the initial license window (i.e., international, home entertainment and other distribution platforms) and are based on historical experience for similar programs (genre, duration, etc.) based on the estimated number of seasons of the series. Ultimates of revenue beyond the initial license fees are generally higher for programs that have been or are expected to be ordered for multiple seasons. We regularly monitor the performance of each season, and evaluate whether impairment indicators are present (i.e., low ratings, cancellations or the season is not reordered), and based upon our review, we revise our estimates as needed and perform an impairment assessment if impairment indicators are present (see below).

 

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For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful or less successful than anticipated. Management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below).

An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in an impairment requiring a write-down of the film cost to the title’s fair value. These write-downs are included in amortization expense within direct operating expenses in our combined statements of operations. See further discussion below under Impairment Assessment.

Impairment Assessment. An individual film or television program is evaluated for impairment when events or changes in circumstances indicate that the fair value of an individual film is less than its unamortized cost. If the result of the impairment test indicates that the carrying value exceeds the estimated fair value, an impairment charge will then be recorded for the amount of the difference.

Estimate of Fair Value. The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. For motion pictures intended for theatrical release, the discounted cash flow analysis used in the impairment evaluation prior to theatrical release is subjective and the key inputs include estimates of future anticipated revenues, estimates of box office performance, which may differ from future actual results. These estimates are based in part on the historical performance of similar films, test audience results when available, information regarding competing film releases, and critic reviews. As disclosed in Note 3 to the audited combined financial statements, the unamortized balance related to completed and not released and in progress theatrical films was $561.5 million at March 31, 2023. For television programs, the discounted cash flow analysis used in the impairment evaluation includes key inputs such as estimates of future anticipated revenue, as discussed above. See further discussion of Valuation Assumptions below.

Valuation Assumptions. The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 10 to our audited combined financial statements and Note 8 to our unaudited interim condensed combined financial statements). The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in management’s future revenue estimates.