Macquarie: Starz Could Fetch 20% Premium In Merger

Shares of Starz (NASDAQ: 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. (NASDAQ: 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.