SEAC II Corp. [LION] Filings

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.

 

 

 

 

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.

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

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.

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.

 

i

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.

 

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“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.

 

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“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.

 

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

 

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“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.

 

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

 

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“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.

 

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“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.

 

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“Closing” are to the closing of the Business Combination.

 

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“Closing Date” are to the date of Closing.

 

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

 

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

 

1

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“Court” are to the Supreme Court of British Columbia.

 

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

 

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“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.

 

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

 

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“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.

 

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“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.

 

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“GAAP” are to generally accepted accounting principles.

 

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“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.

 

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“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.

 

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

 

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

 

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

 

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“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.

 

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

 

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

 

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“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.

 

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“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.

 

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“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.

 

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

 

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“Nasdaq” are to The Nasdaq Stock Market LLC.

 

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“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.

 

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“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.

 

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“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.

 

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“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.

 

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“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).

 

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“Offering Shares” are to PIPE Shares being registered herein.

 

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“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.

 

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“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.

 

3

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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.

 

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

 

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“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.

 

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“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.

 

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“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.

 

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

 

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

 

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

 

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

 

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“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.

 

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“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.

 

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

 

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

 

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“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.

 

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

 

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“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.

 

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

 

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

 

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“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.

 

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

 

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

 

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

 

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“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”).

 

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

 

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

 

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

 

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“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).

 

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“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.

 

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

 

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“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).

 

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

 

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

 

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

 

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

 

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“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.

 

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“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.

 

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

 

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“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.

 

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

 

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“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.

 

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

 

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

 

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“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.

 

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“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.

 

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“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.

 

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

 

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

 

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“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.

 

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

 

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“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.

 

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

 

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“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.

 

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

 

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“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.

 

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“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.

 

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“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:

 

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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;

 

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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;

 

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

 

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general economic uncertainty;

 

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the volatility of currency exchange rates;

 

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StudioCo’s ability to manage growth;

 

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

 

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

 

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the effects of competition on StudioCo’s future business;

 

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

 

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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;

 

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

 

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

 

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changes in personnel and availability of qualified personnel;

 

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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;

 

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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;

 

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

 

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

 

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

 

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

 

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

 

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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;

 

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

 

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

 

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

 

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

 

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

 

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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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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:

 

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

 

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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;

 

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

 

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the impact of trade disputes;

 

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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;

 

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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);

 

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

 

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

 

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

 

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

 

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

 

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

 

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establishing and protecting a new brand identity in competitive markets;

 

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the instability of foreign economies and governments;

 

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

 

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war and acts of terrorism; and

 

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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:

 

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

 

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

 

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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;

 

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increasing its vulnerability to general adverse economic and industry conditions;

 

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

 

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

 

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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:

 

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actual or anticipated fluctuations in Pubco’s operating results;

 

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potential loss of revenue from the Studio Business;

 

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potential loss of revenue from the Starz Business;

 

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the operating and stock price performance of comparable companies;

 

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changes in the Pubco Board or management;

 

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

 

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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.;

 

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

 

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

 

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

 

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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:

 

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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;

 

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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;

 

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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

 

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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

 

45

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

 

46

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

 

48

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

 

49

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

 

50