By Liana B. Baker

(Reuters) - Lions Gate Entertainment Corp <LGF.N>, the film studio behind the Hunger Games movies, said Thursday it would buy premium television network Starz <STRZA.O> for $4.4 billion in cash and stock, in a deal that would unite two media companies with ties to cable mogul John Malone.

Both companies held on and off talks for some time. The long-anticipated deal will help diversify Lionsgate's business and make its financials less dependent on whether it can deliver a hit movie, according to Jefferies analyst John Janedis.

Lionsgate Chief Executive Jon Feltheimer said on a conference call that the deal creates a "global content powerhouse that invests nearly $2 billion a year in new content."

Starz, which competes with HBO and Showtime, also develops original program such as the fantasy series "Outlander."

Lionsgate's bet on a cable network comes with risks, however, as more viewers watch television online and buy fewer cable subscriptions.

"It also increases exposure to the premium cable network business, which faces challenges of its own in a more fragmented media landscape," Janedis said.

Lionsgate will pay $32.70 per share for Starz, representing a premium of nearly 16 percent to Starz's closing price Wednesday.

Shares of Lionsgate fell 3 percent at $20.32, while Starz shares were up 7.6 percent at $30.40.

Lionsgate, which is headquartered in Santa Monica, California and incorporated in Vancouver, Canada expects the deal to add to earnings per share and to close by the end of 2016.

The combined company will have two influential, large shareholders with big voting stakes. MHR Fund Management LCC, run by Lionsgate Chairman Mark Rachesky, will remain the biggest shareholder while Liberty Media's entities, owned by Malone, will be the second largest shareholder.

Starz was spun off from Malone's Liberty Media Corp <LMCA.O> in 2013.

Lionsgate and Malone own shares in Starz, while Malone is also a Lionsgate shareholder who sits on its board. To avoid conflicts of interest, a special committee at Starz was formed to evaluate the offer and Malone was recused from the Lionsgate board, according to a person familiar with the deal.

PJT Partners was the lead adviser to Lionsgate, along with J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank and Credit Suisse.

Starz was advised by LionTree and the Raine Group. The legal advisers on the deal were Wachtell, Lipton, Rosen & Katz and Dentons for Lionsgate and Baker Botts and Weil, Gotshal & Manges for Starz.

(Reporting by Liana Baker in San Francisco and Narottam Medhora in Bengaluru; Editing by Maju Samuel and Bernard Orr)