Shares of Starz STRZA could fetch a 20 percent premium or more over its current market price if rumors of its acquisition pan out, an analyst said Thursday.
The Colorado-based pay-TV company met Tuesday about a deal with Rupert Murdoch's Twenty-First Century Fox Inc. FOX, according to a report by the Los Angeles Times.
Macquarie's Amy Yong estimated Starz is worth $4 billion based on its existing business. Starz' market cap is currently $3.33 billion, while its shares are down nearly 2 percent during the past six months.
Startz' 2014 revenue is expected to fall 1 percent to $1.69 billion, according to the Wall Street consensus.
But Yong, maintaining a Neutral rating on Starz and a $35 target, said a merger could result in synergies worth an additional $400 million while increased scale could open the way for offering direct-to-consumer streaming, as well as reversing a decline in subscribers.
Starz' reported meeting with Murdoch's Fox comes about two months after the 83-year-old Australian media mogul abruptly abandoned his $80 billion bid for Time Warner Inc.
Starz opened sharply higher Thursday, but traded recently nearly unchanged at $31.30 a share.
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