MGM Shareholders Nix Lionsgate Merger30 Oct, 2010 By: Erik Gruenwedel
Shareholders of fiscally-challenged Metro-Goldwyn-Mayer Inc. late Oct. 29 overwhelmingly voted for a pre-packaged bankruptcy plan; rejecting a merger proposal by Lionsgate.
Under terms of the Chapter 11 filing – due in the coming days – senior debt holders would control 95.3% of the studio with Spyglass Entertainment retaining the remainder and placing senior executives Gary Barber and Roger Birnbaum as the co-chairman and CEO of MGM following the its emergence from bankruptcy.
Santa Monica, Calif.-based Lionsgate had submitted a merger proposal that would have retained MGM 55% ownership of the combined studio. It also said the merger would have saved MGM about $100 million in annual overhead costs.
The Lionsgate plan was supported by activist shareholder Carl Icahn, who also owns a sizable stake in MGM and reportedly will assume a board seat in the restructured company.
Icahn’s increasing stake in MGM caught Lionsgate by surprise and prompted the studio Oct. 28 to file a lawsuit against the investor – a move many believe sank its merger proposal.
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, among others, has lost hundreds of millions of dollars over the years as its venerable catalog failed to generate projected revenue.
In recent years the studio had trouble making the interest payments on the $4 billion debt.
MGM films, which include earlier “James Bond” and “Pink Panther” movies, are distributed on disc by 20th Century Fox Home Entertainment.