Overview

Skyline Entertainment Acquisition Corp. (SEAC) is a blank check company formed in 2021 to acquire an operating business. In January 2022, SEAC completed an initial public offering, raising $750 million. The funds are held in a trust account to be used for an acquisition.

SEAC has entered an agreement to acquire StudioCo, a subsidiary of Lions Gate Entertainment Corp., in a transaction expected to close by mid-2024. The deal values StudioCo at $1.3 billion. To help fund the acquisition, SEAC has secured $225 million in private investment.

Financial Performance

As a blank check company without operations, SEAC has incurred expenses but generated no revenue other than interest income.

In the quarter ending March 31, 2024:

• SEAC had net income of $5.2 million due to investment gains
• It incurred $3.4 million in general and administrative expenses
• Interest and investment gains contributed $8.6 million in non-operating income

Trust Account

As of March 31, 2024, SEAC held $804 million of cash in its trust account, reserved for the acquisition of an operating business.

An additional $437,163 in cash is available to fund SEAC’s working capital needs. SEAC estimates it requires approximately $1.9 million over the next year to cover legal, accounting, regulatory fees, insurance premiums, and other expenses prior to completing an acquisition.

Proposed StudioCo Acquisition

On December 22, 2023, SEAC announced an agreement to acquire StudioCo in a transaction expected to provide over $400 million in total proceeds. As part of the deal:

• SEAC shareholders will exchange their shares for newly issued common shares in the combined company on a one-for-one basis
• $225 million in private investments will help fund the deal
• The transaction is expected to close by June 15, 2024

An amended agreement increased the private investment component from $175 million originally to $225 million. This will limit dilution of the ownership interest held by StudioCo’s parent, Lions Gate Entertainment Corp, in the combined company.

Liquidity

SEAC believes it has sufficient working capital to fund operations until an acquisition is completed. However, if a deal is not completed by the June 15, 2024 deadline, SEAC risks having to wind down operations and liquidate the trust account.

SEAC could require additional financing to complete the StudioCo acquisition if the cash portion of the purchase price exceeds trust account balances after shareholder redemptions.

Outlook

SEAC was formed solely to acquire an operating business, including the pending StudioCo acquisition. If the transaction is completed as planned by June 2024, SEAC shareholders will receive shares in the continuing combined business.

If an acquisition is not completed by the deadline, SEAC will likely distribute trust assets to shareholders and then initiate wind-down proceedings. SEAC management remains confident in completing the StudioCo deal prior to the deadline based on progress to date.