Icahn increases pressure on MGM, launches new tender offer to take control of company

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Carl Icahn is turning up the heat on Metro-Goldwyn-Mayer’s creditors to reject the Spyglass Entertainment management plan and merge the financially hobbled studio with Lions Gate Entertainment.

The billionnaire investor on Tuesday launched a new tender offer to buy a majority of MGM’s $4 billion in debt for 53 cents on the dollar. The bid gives the debt holders, who are determining the future of the near-bankrupt studio, a premium over the current trading price of about 45 cents on the dollar.

For the new offer by Icahn, who is already the largest shareholder in Lions Gate, to take effect, at least $1.6 billion worth of MGM’s debt must be sold to him. Combined with the about $500 million he already owns, that would give him a majority of the studio’s debt and full control over its fate.

The new bid, which expires Friday, comes on top of one made last week that gives creditors an option to sell to Icahn for 45 cents on the dollar any time in the next year or up to two weeks after MGM exits bankruptcy. That offer is intended to provide creditors that are willing to oppose the Spyglass plan but not yet ready to sell with protection in case the debt drops in value.

Icahn’s latest offer would cost the billionaire $848 million if enough creditors agree to sell to him.

In addition, Icahn’s offer is conditioned on the rejection of the Spyglass plan, for which creditors’ votes are due Friday. That proposal, which has had the support of MGM’s largest creditors, would put the studio through a pre-packaged bankruptcy, after which debt owners would control 95% of its equity. The rest would go to Spyglass Entertainment, whose chief executives would run a slimmed-down MGM.

Icahn has been a vocal supporter of Lions Gate’s plan to combine the two independent studios and give MGM creditors a 55% equity stake in the merged entity.

Icahn’s new tender offer values MGM at a little more than $2.1 billion, versus the Spyglass deal at $1.9 billion and the Lions Gate merger proposal at $1.8 billion. His latest move indicates that Icahn believes the Lions Gate merger will create the most longtime value for MGM.

It’s possible that some creditors that bought debt for less than 53 cents on the dollar are put off by the long-running instability at MGM or don’t want an ownership stake in a private company and will be attracted to Icahn’s offer. But it remains to be seen if there will be enough to reach the $1.6-billion threshold. In a statement, Icahn said he might buy a smaller amount if less than $1.6 billion were tendered but would definitely not buy more.

An MGM spokeswoman declined to comment. Icahn did not respond to a request for comment.

-- Ben Fritz

Related:

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