Perhaps that Spyglass takeover isn't on such firm ground...
http://www.hollywoodreporter.com/hr/con ... 87e0bcff1f
TORONTO/ORLANDO - Lionsgate's latest swoop on a debt-laden MGM followed extensive discussions with its major shareholders, including billionaire investor Carl Icahn.
And the proposed merger overture from Lionsgate looks to have surprised MGM as it negotiates a separate takeover by Spyglass Entertainment.
In a Tuesday morning amendment to its latest Schedule 14D-9 filing with the SEC, Lionsgate said that it sent MGM on Monday a proposal for a "business combination" between the two companies.
As part of the deal, the new entity would be owned by Lionsgate shareholders and MGM creditors. The latter would get a 55% stake in the merged company, according to the LA Times.
The proposed transaction was made after "detailed discussions" between Lionsgate and Icahn, and with support from additional major shareholders Mark Rachesky and Gordon Crawford, an influential portfolio manager at Capital Research Management. "The company believes that Mr. Icahn, in addition to MHR Fund Management and Capital Research Global Investors, the company's three largest shareholders, are all supportive of the transaction," the filing said.
Icahn, who has major stakes in both Lionsgate and MGM debt, on Tuesday morning backed the proposed combination as boosting "value for all constituencies" and being better for MGM debt holders than the current deal with Spyglass.
But don't expect the MGM deal to halt Icahn's lawsuit against Lionsgate for
its July debt-to-equity swap with rival shareholder Mark Rachesky.
"Whether or not we prevail in those lawsuits, we intend to continue to support a combination of Lionsgate and MGM," he added.
Lionsgate also added in its SEC filing that there was no assurance the proposed combination with MGM will ever be consummated or that the terms of such a transaction will be as proposed by the company.
As for MGM, a studio source, speaking anonymously, said Tuesday the Lionsgate move came as a surprise.
Process insiders had been suggesting there was virtually no chance of any other suitor wresting the studio away from Spyglass Entertainment.
A vote among more than 100 MGM lenders is currently afoot as a prelude to the filing of a prepackaged bankruptcy reorganization plan in U.S. Bankruptcy Court that would give Spyglass operating control of the studio.
The situation was considered so watertight that one studio source said court review was expected to take only 30 days instead of the normal 60 days for a prepackaged bankruptcy.
If completed, the plan would give Spyglass a 4.7% equity stake in the studio, with the rest owned by MGM's lenders. Spyglass toppers Gary Barber and Roger Birnbaum would become co-chairmen and co-CEOs of MGM.
MGM lenders have until Oct. 22 to complete their voting on the plan.
MGM's current owners -- including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle -- would see their hold on the studio wiped out in the proposed reorganization.
Hedge funds Anchorage, Highland, Davidson Kempner and Solis acquired about
35% of MGM's publicly traded debt the past year.
Approval of a prepackaged bankruptcy would be needed from 51% of lenders and a group representing two-thirds of the amount owed.
The studio is being run by an office of the CEO comprising turnaround specialist Stephen Cooper, CFO Bedi Singh and film topper Mary Parent. All likely would exit their posts as part of any MGM reorganization.