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Icahn launches hostile bid for Lions Gate, MGM merger in doubt

20-Jul-2010 • Bond News

Carl Icahn has launched a renewed hostile bid for Lions Gate Entertainment just 24 hours after the end of a 10-day truce between the activist investor and the Hollywood studio, reports the Financial Times.

Mr Icahn made a hostile bid worth $6.50 a share – less than the $7 a share offer he made a few months ago, which Lions Gate then described as “financially inadequate”.

The timing of the latest offer is curious because it comes at the end of informal discussions between Mr Icahn and the Lions Gate management team whereby the two sides agreed to look at acquisition opportunities.

Lions Gate, producer of the Saw horror series and TV series such as Weeds and Mad Men, submitted a merger proposal to lenders of the stricken Metro-Goldwyn-Mayer studio while these talks were taking place – an offer which had Mr Icahn’s tacit support.

That offer to MGM now looks to be in doubt, following Mr Icahn’s latest bid, although in a statement he did not rule out a future Lions Gate-MGM combination. “While certain discussions regarding acquisition opportunities might continue in the future, the Icahn Group determined that there were no immediate opportunities that would merit extension of the 10-day standstill period,” he said.

Mr Icahn has over the past two years increased his stake in MGM to 37.3 per cent, defying efforts by the Lions Gate’s board to limit his holding in the company. Public statements between the two sides have grown increasingly acrimonious although there were hopes that the recent 10-day truce and the offer for MGM might lead to a longer term agreement.

Lions Gate has long eyed a merger with MGM and submitted an offer worth about $1.4bn for the studio last year, but withdrew the bid shortly afterwards.

The companies are the only two Hollywood studios not part of larger media conglomerates. MGM has laboured under a $4bn debt burden and is in the hands of its lenders after it became unable to continue making its interest payments.

There are more than 100 lenders to the studio, which owns the rights to the James Bond series, which have been examining a series of merger proposals: Lions Gate’s offer had been gathering momentum according to people familiar with the situation.

But there are also competing offers on the table from Summit Entertainment and Spyglass Entertainment.

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