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UPDATE: Carl Icahn Wants 2nd Hollywood VIP For His Lionsgate Board + MGM News

WEDNESDAY UPDATE, 12:30 PM: Here’s another potential Lionsgate board member whom Carl Icahn is wrangling — filmmaker Jay Firestone, a one-time vice chairman of Alliance Communications in Canada. According to insiders, it makes sense for Icahn to want an executive from Up North since Lionsgate is based there and in Santa Monica. Also, the two men have movie history together: Fireworks Entertainment, which Firestone started when he left Alliance in 1995, was partnered in IDP Distribution along with Samuel Goldwyn Films and Icahn’s film company Stratosphere Entertainment. Sources tell me Fireworks burned through $100 million in financing from parent company CanWest Global Communications, which in 2003 didn’t renew founding president and CEO Firestone’s 5-year contract. Fireworks initially specialized in genre TV production, then expanded into feature film production and distribution when it was acquired by CanWest, opening offices in LA and London. But it had little success: 1999′s Onegin, 2000′s Rules Of Engagement, 2001′s Rat Race, and 2002′s Who Is Cletis Tout. Fireworks was shuttered by CanWest in April 2004. Firestone now runs Prodigy Pictures.

TUESDAY UPDATE, 1 PM: Carl Icahn right now is assembling his slate of board members hoping to unseat Lionsgate’s current board of directors at the film/TV studio’s scheduled December 14th shareholders meeting in Los Angeles. And I hear that Chris McGurk, the former MGM President and COO and Vice Chairman and Overture CEO, may join Icahn’s proposed slate because of his MGM experience now that Icahn and Lionsgate want that company, too. One of my Lionsgate insiders claims McGurk is lobbying for the board seat. But others tell me Icahn called McGurk out of the blue on Monday morning and offered it to him. Icahn won’t be packing the board with Hollywood types, however: instead, sources tell me he’s going after “people from other industries who are above approach from the SEC” since the crux of his problems with Lionsgate are the board’s alleged SEC violations. As for McGurk, he’ll have to see whether joining the Lionsgate board presents any conflicts of interest now that he’s figuring out his next movie. “He’s playing hard to get, if anything,” an insider tells me.

Usually, a proxy fight like the one Icahn has pledged to wage against Lionsgate is a very expensive proposition that takes months of preparation and involves contacting every shareholder. But this is being done with virtually no time and little expense. Just today, Icahn, who owns 33% of Lionsgate, extended his $7.50-per-share tender offer to December 2nd.

That’s the same day that MGM is supposed to receive confirmation of its pre-packaged bankruptcy plan. Icahn owns 15%-18% of MGM’s debt. There continue to be reports of an Indian company, and a Chinese company sniffing around, as well as Lionsgate, who may make another play for MGM. I’m told by a source that Lionsgate’s merger proposal is “gaining a lot of steam with many of the hedge funds in the credit. Not sure where the Big Four stand (Highland, Anchorage, Davidson Kempner, and Solis) but for many of the hedge funds, a merger with LGF gives them a liquidity option.” Meaning the MGM creditors will own a public stock that they can sell whenever they want to — a big plus. But ”$500 mil plus 55/45 won’t get it done. They will probably have to raise the offer to 60/40 and demonstrate that the merged entity is viable.”

As for McGurk, he most recently was CEO of Anchor Bay Entertainment. McGurk was with MGM from 1999 to 2005 and was responsible for all operating and planning activities for the Motion Picture Group, as well as all international operations, worldwide home entertainment, exhibition (UCI and Loew’s Cineplex), October Films and Polygram Filmed Entertainment. According to his official bio, McGurk “played the leading role in MGM’s reinvigoration, spearheading efforts that resulted MGM’s industry leadership in Home Entertainment library sales, marketing and distribution. Mr. McGurk maximized the asset value of Hollywood’s largest modern film library, transformed the Hollywood’s largest modern film library’s United Artist’s label into a specialty film unit and negotiated strategic alliances with Twentieth Century Fox and NBC.”

So let’s look at the last 6 months regarding Icahn and Lionsgate and MGM:

After the failed auction sale, MGM creditors explored every avenue. Lionsgate was talking to them about a merger since June, trying to get real financials as well as a governance plan. (Later press reports saying MGM creditors had rejected Lionsgate’s proposal were not accurate.) Icahn, in the midst of his Lionsgate battle, opposed the idea and publicly likened Lionsgate’s desire to merge with MGM to overstretched homebuyers. “It’s analogous to a couple not being able to pay their mortgage on a little house and starting to negotiate on a big, overpriced mansion that’s rumored to be haunted.” By June 21st, the MGM Steering Committee’s support of the Spyglass plan was leaked. The hedge fund guys with big MGM debt also like the fact that Spyglass’ Gary Barber and Roger Birnbaum have figured out how to operate successfully with its money from Cerebrus. (Others think it was a disaster) No matter: that money is due to run out which is why Spyglass wants to run MGM.  Read More »

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Lionsgate Sues Carl Icahn, Says He Was Playing A “Double Game”

Lionsgate has sued its biggest shareholder Carl Icahn, claiming he publicly opposed a merger between the company and MGM then gummed up the process until he could profit substantially from a potential marriage. Lionsgate claims Icahn publicly said he would oppose the merger, only to turn around and secretly buy up a large stake in MGM’s debt…and then push for the merger. ”It turns out that Icahn was misleading Lionsgate and its shareholders all along,” the lawsuit, filed in New York, says. And that “recent developments indicate he was playing a double game. Icahn opposed a merger not because it was bad for Lionsgate but because it was good – so good in fact that he wanted to postpone it until he could buy up as much of both companies as he could.” The suit also says that, “While urging Lionsgate shareholders to support his takeover campaign to ensure that Lionsgate did not pursue what he called a ‘delusional’ MGM transaction, Icahn was quietly amassing a huge position in MGM debt with the undisclosed intention of reaping profits from both sides in an eventual merger.” All of this comes one day before the voting deadline on a proposed prepackaged bankruptcy plan that would see Spyglass Entertainment’s Gary Barber and Roger Birnbaum take over the studio. Just this week, Icahn redoubled his efforts to buy up even more MGM debt in preparation for a Lionsgate merger, so the big unknown is how any … Read More »

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Carl Icahn and Lionsgate Redouble Efforts To Buy Up MGM Debt To Thwart Spyglass

Mike Fleming

Carl Icahn is now offering 50 cents on the dollar for MGM debt in an attempt to bolster his position before creditors vote Friday on a reorganization plan that puts Spyglass partners Roger Birnbaum and Gary Barber in the driver’s seat of the debt-hobbled studio. Icahn had previously been offering 45 cents on the dollar for debt, and the new offer comes with the stipulation that debt holders vote against the Spyglass offer. Lionsgate brass recently came out with an impassioned speech on why a Lionsgate-Icahn deal was better for creditors than the Spyglass plan which is half a year in the making. Considering how bitter the battle has been between Icahn and Lionsgate brass as he’s tried to take over the minimajor, doesn’t it sound like that couple you know, the one that is fighting constantly and decides that if they just went ahead and had a baby, everything would be perfect? MGM, which watched Mary Parent exit as its pic chief after she was stymied in her efforts to create a production slate for the Lion, needs a steady hand and many feel that the Spyglass guys would provide it. The prepackaged bankruptcy with Birnbaum and Barber has never been viewed as a permanent solution. It has always been viewed by insiders as “kicking the can down the road.” Bolder plays with an outside suitor like Lionsgate is necessary later on, but it doesn’t necessarily have to … Read More »

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Carl Icahn Makes Another Offer To Buy Up Even More MGM Debt

Carl Icahn has made another offer to MGM lenders in hopes of thwarting the prepackaged bankruptcy plan and Spyglass deal. He’s now offered to buy $1.6 billion in debt at a premium price of 53 cents on the dollar; last week, he offered to buy $963 million in debt. The offer expires Friday — the voting deadline for the bankruptcy/Spyglass plan that would put Gary Barber and Roger Birnbaum in charge. On Monday, Lionsgate sent a letter to MGM proposing that a Lionsgate-MGM merger, which Icahn now supports, could save about $100 million annually and increase revenues. If Icahn indeed manages to buy up the $1.6 billion, the total amount he would own would give him a majority of the debt. The Spyglass plan would give lenders 95% ownership of the company; a Lionsgate merger would give creditors a 55% equity stake.

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Lionsgate Says Merger With MGM Would Save $100 Million A Year

In a letter sent to MGM on Monday, Lionsgate said its proposed merger with the studio would amount to $100 million in annual savings while boosting cash flow by $120 million over five years. Documents were also filed with the SEC. Among the details of the proposed merger: The new company would lead to a reduction in staff of about 175 people, or 17% of the combined workforce of the two companies. And a merger between MGM and Lionsgate would lead to the production of 16 movies per year. MGM’s board faces a Friday deadline to vote on a proposed prepackaged bankruptcy plan in which Spyglass Entertainment’s Gary Barber and Roger Birnbaum would be put in charge. Under that scenario, creditors would own 95% of the studio’s equity. The Lionsgate proposal gives MGM creditors 55% of the equity. Last week, Carl Icahn, who supports the Lionsgate plan, offered to buy another $963 million of MGM’s debt.

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Icahn Makes Offer To Buy More MGM Debt To Expedite Merger

Calling the proposed Spyglass plan a “presciption for disaster,” Carl Icahn on Thursday offered to buy another $963 million of MGM’s debt. He already owns around $500 million of it, so the sum would make him one of MGM’s largest creditors – with a stake of around 37%. Pending the offer, he would then be in a good position to approve a merger between Lionsgate and the studio, one he now supports. Some of MGM’s creditors are pushing hard for that prepackaged bankruptcy plan that would instead see Spyglass’ Gary Barber and Roger Birnbaum come in and run the studio. As a condition of his offer, Icahn said anyone selling to him must vote against the Spyglass plan; a vote is scheduled for Oct. 29. Icahn also stated on Thursday: “This is the critical decision point for MGM lenders, yet we are being rushed into an extraordinary Prepackaged Plan with limited information and input, on a “hurry up basis” that frustrates any dissent. I hope to defeat this “rush to judgment.”

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Mary Parent Is Officially Out At MGM; Studio’s Lenders Given More Time To Review Spyglass Info

BREAKING NEWS… UPDATE: She has signed a non-disclosure agreement and therefore can’t talk publicly to the media. But, making no secret that she was negotiating her exit from MGM after taking the job in April 2008, Mary Parent this afternoon is now officially out at the studio where she was Chairman of the Motion Picture Group and Co-CEO. It’s a sad ending to Parent’s struggle to revive the debt-ridden cash-strapped studio and get it producing and distributing movies again against huge odds. That she was able to accomplish anything at all, even a few releases and co-productions, is testament to her professionalism and personality. Hollywood needs to salute her.

Parent and her staff, meanwhile, has had to go into the Century City offices every day for months and basically do nothing. “A really good group of people came in here to sit on the bench in their prime. What wasted capabilities and wasted potential,” she has told pals. In private conversations with Hollywood, she called it “a perfect storm against us” of events that sank her management team. She’ll probably catch her breath before thinking about another job. (The offers are just coming in now.) In the end, she like everybody else puts all the responsibility for the studio’s demise on Harry Sloan and his inability to tell the truth. ”In a weird way, it’s like coming off a bad relationship,” she told a friend Friday. “I married the wrong guy and woke up pregnant.” (see below for more) Read More »

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Lionsgate Pleads Case For Its MGM Merger

Mike Fleming

Lionsgate is making its argument for a merger with hobbled studio MGM, a move that is supported by Carl Icahn, who has been trying to take over  the mini-major while simultaneously buying up MGM debt. The timing is meant to provide an option for the current restructuring plan that will be voted on by MGM lenders this month. That plan would revive the Lion most likely as a production entity without distribution and marketing, headed by Spyglass chiefs Roger Birnbaum and Gary Barber. I’ve always thought the plan before creditors right now is an interim step, and that an alignment between the Lion and Lionsgate, or a studio like Warner Bros will happen down the road regardless, once the studio gets moving again on The Hobbit and James Bond. Here is Lionsgate’s release:

SANTA MONICA, CA, and VANCOUVER, BC, October 13, 2010 — Lionsgate (NYSE: LGF) (“the Company”), the leading next generation studio, today emphasized the value creation potential of its proposed merger combination with Metro−Goldwyn−Mayer Studios Inc. (“MGM”). The Company filed an Amendment to Schedule 14D-9 with the Securities and Exchange Commission yesterday disclosing that it sent an October 11 proposal to MGM regarding a potential business combination between the two companies. Under the terms of the proposal, the combined company would be owned by shareholders of Lionsgate and creditors of MGM.

“This is a unique, once in a lifetime opportunity to create a dynamic, forward-looking studio that unlocks

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Lionsgate, Carl Icahn Set Sights On MGM

Below is Carl Icahn’s statement from this morning expressing his support for a proposed Lionsgate/MGM merger. Late Monday, Lionsgate sent a proposal to MGM expressing support of a ”business combination” after what it called “detailed” discussions with Icahn. All of this after rebuffing Icahn’s attempts for so long. This latest development comes just days after MGM  said it was planning a merger with Spyglass wherein Gary Barber and Roger Birnbaum would be the new bosses.

“We are holders of significant positions in both Lions Gate 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.”

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Carl Icahn Now Owns 33.9% Of Lionsgate

icahn lgThe studio sees the glass as half full, putting out a statement that “66% of Lionsgate stockholders support management and rejected Carl Icahn’s $7-a-share tender offer. But after that offer expired last night, Carl Icahn now owns 33.9% of the Santa Monica movie and television studio which he’s been attempting to control for his son Brett through a hostile takeover. I’ve already reported that Lionsgate Vice Chairman Michael Burns flew to NYC last week to break bread with Icahn and discuss, among many topics, Lionsgate’s merger talks with MGM. But the rehetoric from both sides remains nasty. So can a negotiated settlement be reached before Icahn starts that promised expensive proxy fight prior to the studio’s annual shareolders meeting this September? the next news may well be Icahn’s announcement of a full slate of directors to replace Lionsgate’s board. here’s Lionsgate’s statement today:

At the completion of the Icahn Group’s offer, holders of over 66% of Lionsgate shares have rejected the Icahn Group’s offer, with only 2.1% of the outstanding shares being tendered into the offer during the subsequent offering period.

We want to take this opportunity to thank our shareholders. Lionsgate’s shareholders have repeatedly confirmed their support for the Board and management’s strategy to grow shareholder value by continuously rejecting the Icahn Group’s financially inadequate offer.

Our focus continues to be running the business to build value for all of our shareholders. As reflected in our strong fiscal 2010 results,

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Michael Burns And Carl Icahn Break Bread

icahn lgEXCLUSIVE: Reliable sources tells me that Lionsgate vice chairman Michael Burns flew to NYC on Wednesday night to have dinner with Carl Icahn “to see if they could work together and avert a hostile takeover of the studio”. This is a very big deal because in recent months and weeks the two men have been sparring very publicly on CNBC. Or Icahn and Lionsgate management have been sending nasty letters to shareholders and even nastier news releases to the media about each other.  I understand that Burns explained why Lionsgate is having merger talks with MGM. That may be the reason why Carl was not completely dismissive of the idea Friday – but not why he still slammed management for distracting from the studio’s problems. Remember, a proxy fight like the one Icahn has pledged to wage is a very expensive proposition. And now that Lionsgate stock has joined the Russell 2000 index and jumped past Carl’s $7-a-share tender offer, Icahn may have to offer at least $7.50 to control more than 32% of the studio. Thus making his hostile takeover still  more pricey.

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Lionsgate Stock Jumps As Joins Russell 2000; Icahn Slams Lionsgate-MGM Merger

icahn lgAnother day, another brawl between Lionsgate and its biggest shareholder Carl Icahn as he attempts a hostile takeover of the studio. Today, he gave an interview to Dow Jones newswire saying he wouldn’t rule out supporting a merger between Lionsgate and MGM but slamming the benefit to shareholders of a deal between them. ”I’ve found in my investment career that it’s very difficult but not impossible to cure one problem you have by taking on a second problem,” said Icahn, noting that film libraries are under pressure due to uncertainty about the future of the DVD sales business, which is in decline. ”This is analogous to a couple that is having a lot of problems paying the mortgage on a relatively small house,” Icahn added. “Instead of focusing on taking care of those problems, they’re out negotiating to buy a big mansion down the street that’s rumored to be haunted.” On another front, Icahn says Lionsgate shares are now “artificially overvalued” as the stock price rose to $7.27 today, well above his tender offer of $7 a share, because the studio was being added to the Russell 2000 index at the close of trading. Liosngate insiders insist the the studio’s June 1st reporting of its better-than-expected performance (70% higher than its initial guidance) is the reason for the higher stock price.

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WHY NOW? Baffling Resurgence Of Rumor About MGM-Lionsgate Merger Talks

lionsgate_logoI’m being told there’s really nothing new with these explanatary conversations. And, anyway, Lionsgate can’t do any kind of deal with MGM unless the studio management brokers some settlement with 32% shareholder Carl Icahn, who has made it clear he won’t approve any big buys by the studio right now. Strange that this is coming on the heels of reports that Spyglass is in the lead to run MGM. (Spyglass Beating Summit To Run MGM?)

Lionsgate management attempted a lowball bid of $1.3B-$1.4B during the MGM auction and then dropped out in March. MgmlogosmallThat’s the last time Lionsgate defied Icahn’s warning not to do any major deals. Among other customary conditions, Icahn’s offer has tightened the reins on Lionsgate not to “enter into any material transaction outside of the ordinary course of business (including any acquisition of assets over $100 million, and any issuance of securities other than upon the exercise of currently outstanding options)”. Though buying MGM would make Lionsgate a bigger player in Hollywood, such an acquisition would add tremendous debt to the studio. And if they gave stock to a seller, then it would dilute Icahn’s stake. Carl wouldn’t be happy about that.

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