Lions Gate said to approach MGM creditors on purchase
Lions Gate Entertainment Corp., the independent film and TV producer, has approached creditors of ailing Metro-Goldwyn-Mayer Inc. to help shape a plan to acquire the studio, two people with knowledge of the situation said.
Lions Gate Vice Chairman Michael Burns has been meeting in New York with investors who hold some of MGMâs $3.7 billion debt, according to the people, who requested anonymity because the discussions are private, says Business Week
Any agreement to buy Los Angeles-based MGM would have to be approved by Carl Icahn, Lions Gateâs largest shareholder. He took a 10-day break from efforts to gain control of Vancouver- based Lions Gateâs board so the company could make a case for certain acquisitions. That standstill agreement expires on July 19. Debt-hobbled MGM is co-owner of the James Bond franchise.
Icahn, 74, who holds almost 38 percent of Lions Gate shares, isnât a party to the talks, one person with knowledge of Burnsâs efforts said yesterday. The billionaire investor threatened a proxy fight to elect his own board at Lions Gate, distributor of the âSawâ movies, after failing to gain a majority of the stock with a $7-a-share takeover bid.
Icahn, who said in March he opposes the purchase of film libraries such as MGMâs, couldnât be reached. Burns didnât respond to a request for comment.
Michael Utley, spokesman for Houlihan Lokey, the investment bank advising MGMâs creditor committee, declined to comment, as did Susie Arons, an outside spokeswoman for MGM.
The creditors, who formed a committee that represents MGMâs 100 or so debt holders, havenât agreed on a unified position, the people said.
The creditorsâ lack of unity underscores the difficulty Burns faces as he tries to craft a deal that will satisfy MGMâs debt holders and Icahn, who has said he wonât approve a large equity-for-debt swap that dilutes his holdings.
Peter Wilkes, a Lions Gate spokesman, said on July 9 the studio âwouldnât do a highly leveraged deal that added significant debt to our balance sheet.â
Lions Gate said in February that it hired Morgan Stanley as its financial adviser after receiving a tender offer from Icahn.
Shares of the company, also the producer of the Emmy winning âMad Menâ TV series, fell 17 cents to $6.53 yesterday in New York Stock Exchange composite trading. Lions Gate, run from Santa Monica, California, has gained 12 percent this year.
MGM was put up for sale last year after falling behind on its debts. Creditors have granted the studio several reprieves on interest payments. The studioâs latest forbearance agreement expires tomorrow.
The studio was taken private for $5 billion in 2005 by buyers including Providence Equity Partners.
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