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Icahn Supports Lionsgate, MGM Merger

12 Oct, 2010 By: Erik Gruenwedel

Carl Icahn

Activist shareholder Carl Icahn Oct. 12 said he supports efforts by Lionsgate to merge operations with fiscally challenged Metro-Goldwyn-Mayer (MGM).

Santa Monica, Calif.-based Lionsgate, in a regulatory filing late Oct. 11 from CFO James Keegan, said it would be amenable to a merger with MGM and creating a new company owned by Lionsgate shareholders and MGM creditors.

MGM last week said it would seek a pre-packaged bankruptcy whereby senior creditors holding more than $4 billion in debt would become equity holders in a restructured company run by minority stakeholder Spyglass, and placing Gary Barber and Roger Birnbaum, currently co-chairman and CEO of Spyglass, as the co-chairman and CEO of MGM.

Icahn owns equity stakes in Lionsgate and MGM and has engaged in lengthy efforts to acquire controlling stakes in both companies.

“We believe that this combination of Lionsgate and MGM would enhance value for all constituencies and we believe this proposal as submitted is far better for MGM holders than the current proposal to combine MGM with Spyglass,” Icahn said in a statement.

The investor is currently embroiled in a hostile takeover attempt of Lionsgate, which includes a $7.50 per share offer for outstanding common shares. That offer is predicated on Icahn emerging successful in separate litigation against Lionsgate, which is slated to begin in a Vancouver court today.

Lionsgate CEO Jon Feltheimer called the possible merger a “once-in-a-lifetime opportunity” that would help both studios streamline costs and increased incremental revenue possibilities.

“A Lionsgate merger with MGM is a natural fit that would bring together two of the most powerful libraries in the world, create significant cost savings, consolidate our mutual global channel operations and generate significant incremental revenue and cash flow,” Feltheimer said in a joint statement and vice chairman Michael Burns.

Lionsgate has previously sought acquiring a stake in MGM’s vaunted film catalog for repurposing in its extensive home entertainment distribution network and burgeoning pay-TV platform, Epix, which is also co-owned by MGM.

The venerable studio last week gave its lenders until Oct. 22 to approve the Spyglass plan, which is reportedly being pushed in order to begin production of two movies based on J.R.R. Tolkien’s The Hobbit with Warner Bros.’ New Line Cinema.

MGM, which was bought for $5 billion in 2004 by a consortium led by private equity firms TPG, Providence Equity Partners, Sony Corp. of America and Comcast, has lost hundreds of millions of dollars over the years as its venerable catalog failed to generate projected revenue, notably in packaged media.

MGM films, which include earlier “James Bond” and “Pink Panther” movies, are distributed by 20th Century Fox Home Entertainment.


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