Lions Gate proposes MGM business combination; Icahn announces support

By Caroline Salls

Pittsburgh, Oct. 12 - Lions Gate Entertainment Corp. has sent a proposal to Metro-Goldwyn-Mayer Studios Inc. for a potential business combination between the two companies under which the combined company would be owned by Lions Gate's shareholders and MGM's creditors, according to a schedule 14D-9 filed with the Securities and Exchange Commission.

The Lions Gate proposal was made after "detailed discussions" with Icahn, the filing said.

Lions Gate said it believes that its three largest shareholders, including Icahn, MHR Fund Management and Capital Research Global Investors, all support the proposed transaction.

In a statement released Tuesday, Icahn said, "We are holders of significant positions in both Lions Gate stock and MGM debt."

"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," Icahn said in the release.

"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."

As previously reported, MGM has launched a solicitation of votes from its secured lenders for a pre-packaged plan of reorganization under which the secured lenders would exchange more than $4 billion in outstanding debt for 95.3% of equity in the reorganized company.

In addition, Spyglass Entertainment would contribute assets to the reorganized company in exchange for 0.52% of the equity.

Two entities owned by Spyglass affiliates - Cypress Entertainment Group, Inc. and Garoge, Inc. - would merge with a subsidiary of MGM, with the MGM subsidiary as the surviving entity.

A tender offer by Icahn's affiliates to acquire any and all of Lions Gate's outstanding common shares for $7.50 per share will expire at 8 p.m. ET on Oct. 22.

MGM is a Los Angeles-based motion picture, television, home video and theatrical production and distribution company.

Lions Gate Entertainment Corp. is a filmed entertainment studio with headquarters in Vancouver, B.C.

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