Lionsgate makes new bid for MGM


Although MGM creditors are being asked to vote on a Chapter 11 reorganization plan for the studio, Lionsgate Entertainment has jumped back into the bidding with a new merger offer. And despite their ongoing battling over other issues, Lionsgate’s largest shareholder, Carl Icahn, says he supports the merger plan.

Rather than the pending reorganization plan which would have MGM managed by Gary Barber and Roger Birnbaum of Spyglass Entertainment, with MGM’s creditors as 95% owners, Lionsgate is proposing a merger which would give MGM’s creditors a 55% stake in the merged TV/movie studio/distribution company. Lionsgate stated in an SEC filing that the offer was made after “detailed discussions” with Icahn and that the company believes that not only is Icahn supportive, but its other two largest shareholders as well – MHR Fund Management and Capital Research Global Investors.

Indeed, Icahn is onboard. He’s not only Lionsgate’s largest shareholder, but also owns a large chunk of MGM’s debt, so he sees the proposed merger as a win-win.

“We are holders of significant positions in both Lions Gate [sic] stock and MGM debt. Today, Lions Gate has made a proposal to combine these two companies. We believe that this combination of Lions Gate 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. In addition, we also believe such a combination transaction would enhance the value of Lions Gate shares. However, we intend to continue to pursue our lawsuits regarding Lions Gate’s recent dilutive transaction with Mark Rachesky. Whether or not we prevail in those lawsuits, we intend to continue to support a combination of Lions Gate and MGM. Our support for this combination is conditioned on the combined company having satisfactory corporate governance provisions,” Icahn said in a statement Tuesday (9/12), a day after Lionsgate made its formal merger offer to MGM.

Icahn still has a hostile takeover bid pending to buyout any and all other Lionsgate shareholders at $7.50 per share. That tender offer is currently scheduled to expire on October 22nd. However, it is conditioned upon elimination of the poison-pill defense adopted by the Lionsgate board. A Canadian court has been asked by Icahn to void the poison pill and also to unwind the debt-for-equity deal the company did in July which diluted Icahn’s equity stake in the company. A hearing is scheduled for Wednesday (10/13) in Vancouver, British Columbia.

RBR-TVBR observation: Business is business. Icahn and Lionsgate CEO Jon Feltheimer may not see eye-to-eye on how the TV/movie studio/distribution company should be run, but both agree that the main objective is to make a buck. A strong merged Lionsgate/MGM may look more attractive to many of MGM’s creditors than taking equity shares of a stripped-down but still independent MGM post-Chapter 11.