Lions Gate Entertainment Corporation (LGF) is in a possible purchase or merger discussion with Metro-Goldwyn-Mayer (MGM), but it is still in its early stages to make any comment whether the deal between the two film studios will materialize, The Wall Street Journal reported on Friday, June 25, 2010.
At one end, Lions Gate is defending against the hostile takeover bid from the billionaire investor, Carl Icahn, who has recently raised his stake in the company to 31.8%, at the other end, MGM that owns the James Bond film franchise and other titles, is struggling to restructure its heavy debt-load of approximately $3.7 billion and avoid possible bankruptcy.
If the discussion between the two companies takes on a positive note, Lions Gate will have to consider Carl Icahn’s approval, who had earlier opposed the company’s $1.4 billion bid to acquire MGM due to shrinking DVD sales amid the economic downturn and the increase in digital film distribution.
Mr.Icahn has made an offer of $7.00 per share for acquiring all the outstanding shares of Lions Gate. He had earlier made it clear that if he succeeds in his current takeover bid, he would replace the company’s top management and board with his nominees as he believes that the current board is not fit to guide the company through the difficult period.
However, Lions Gate remained optimistic about its future prospects betting on the strength of its film library, home entertainment and televisions businesses, and indicated that despite Carl Icahn’s repeated attempts to acquire the company, the holders of 68% of the company’s shares continue to rebuff his offer.
Lions Gate is a film studio, which produces and distributes motion pictures for theatrical and straight-to-video release, and television programming for the cable and broadcast networks.
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