Brexit Thwarts Starz's Attempts To Partner With Lions Gate

Starz STRZA and Lions Gate Entertainment Corp. (USA) LGF were heavily rumored to merge, but the recent Brexit voting outcome will likely prevent that from happening.

According to the New York Post, one of the banks involved in the deal withdrew from the process after the British pound plunged 10 percent versus the U.S. dollar on Friday and Monday.

"It fell apart over the weekend," the source told the New York Post. "Brexit hurt the financing. It's dead."

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Chatter of a combination between the Hollywood studio behind the "Hunger Games" franchise and the premium pay-TV channel surfaced again over the past few weeks. On June 23, shares of Lions Gate gained nearly 6 percent, while Starz's shares gained 5.5 percent as investors and traders were banking on the fact that a merger announcement is approaching.

One of Lions Gate's owners, John Malone, also happens to control Starz.

Both companies might gain from a combination through synergies and operational improvements. Another factor to consider is that both of their stocks are significantly lower year-to-date.

Lions Gate's stock has lost 44 percent over the past year, while Starz's stock is lower by around 39 percent.

At time of writing, Lions Gate was up 3.98 percent on the day at $20.91, while Starz was trading up 0.64 percent at $27.69.