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Carl Icahn boosts MGM, Lions Gate stakes as he presses for merger

Carl Icahn has been quietly accumulating more shares in Metro-Goldwyn-Mayer and Lions Gate Entertainment as he continues to seek a merger of the independent studios.

August 20, 2011|By Ben Fritz, Los Angeles Times

Carl Icahn still wants to see Hollywood's two lions get married.

The billionaire investor has been quietly accumulating more shares in Metro-Goldwyn-Mayer Inc. and Lions Gate Entertainment Corp. as he continues to seek a merger of the two independent studios.

Since MGM and its roaring lion logo emerged from bankruptcy in December, Icahn has increased his holdings to about 20% from 15%, according to people familiar with the matter who were not authorized to speak about the company's financial details. He has bought the additional stock in private transactions, they said, because MGM's shares aren't publicly traded.

Meanwhile, over the last two weeks Icahn has acquired 756,840 shares in Lions Gate, growing his ownership stake to 33.2% from 32.6%. Last year, Icahn — Lions Gate's largest shareholder — failed at an attempt to seize control of the company and oust its management, led by Jon Feltheimer and Michael Burns, whom he has long criticized for overspending and having a faulty business strategy.

Though Icahn's precise intentions remain murky, people familiar with the matter said he has continued to urge a merger between Lions Gate and MGM even though his attempts last year at such an arrangement failed.

Icahn did not return a call seeking comment. An MGM spokeswoman and a Lions Gate spokesman declined to comment.

Many people in Hollywood have long thought a Lions Gate-MGM merger would make sense. Santa Monica-based Lions Gate, producer of the Tyler Perry films and "Mad Men" cable television series, has strong TV and film production businesses. MGM has a valuable library of about 4,000 titles and international television channels.

"A merger makes as much or more sense today than even a year ago," said David Bank, a media analyst with RBC Capital Markets. He said MGM's television library has grown even more valuable as digital distribution deals made by Hollywood studios continue to "focus less on theatrical and more on television."

At the same time, he noted that Lions Gate's hand has been strengthened by its recent deal with AMC and "Mad Men" creator Matthew Weiner to continue the popular cable series and by the studio's plans to launch a new movie franchise based on author Suzanne Collins' bestselling "Hunger Games" books.

"The company's prospects have gotten a little healthier," said Bank.

Talks last year about a merger between MGM and Lions Gate fell apart over how to value each studio, leading MGM's creditors to put it in bankruptcy and put former Spyglass Entertainment chiefs Gary Barber and Roger Birnbaum in charge.

The two studios are not believed to be in merger discussions now.

Icahn's recent purchases of Lions Gate stock — his first since a year ago — have led some to believe that the dissident shareholder may be planning to once again run his own slate of directors at the company's Sept. 13 annual meeting in Toronto. Last year, he put up a slate of five candidates in hopes of shaking up management, but all of them lost.

So far, Icahn has not signaled an intention to nominate board members or otherwise cause a stir at the meeting. But with his growing ownership stake, such a move remains possible. Last week, Lions Gate announced that it was nominating the same 12 directors who were elected last year and who are currently running unopposed.

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