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Carl Icahn exits Hollywood, sells stake in MGM

July 31, 2012|By Ben Fritz
  • Carl Icahn has sold his 25% stake in MGM back to the company for $590 million.
Carl Icahn has sold his 25% stake in MGM back to the company for $590 million. (MGM )

Carl Icahn, who only a year ago hoped to combine two studios and create an entertainment empire, has retreated from Hollywood by selling his stake inĀ Metro-Goldwyn-Mayer.

The billionaire investor has quietly sold his approximately 25% stake in MGM, the 88-year-old studio behind the James Bond series and the upcoming "Hobbit" trilogy, back to the company in a deal worth $590 million.

The move comes less than a year after Icahn sold his 33% stake in film and television studio Lions Gate Entertainment, which he originally wanted to merge with MGM.

MGM agreed to pay Icahn $33.50 for each of his 17.6 million shares, according to a confidential letter sent to other stockholders and obtained by theĀ  Los Angeles Times. That represents a premium of nearly 20% over MGM shares' most recent trading price of $28 on private markets, said a person with access to the information but not authorized to speak publicly.

Since the price Icahn originally paid for his MGM shares is not public, it could not be determined whether he made a profit on the agreement. He did not respond to a request for comment.

In 2010, Icahn bought up MGM debt -- which was later turned into equity -- with the goal of merging the struggling film and TV company with independent Lions Gate and creating a giant that would rival major studios like Paramount Pictures and Universal Pictures.

Icahn -- a 76 year-old Wall Street trader who has been an activist shareholder in a variety of firms including Time Warner, Yahoo and RJR Nabisco -- was considered a thorn in the sides of both MGM and Lions Gate. He long criticized Lions Gate management, led by Chief Executive Jon Feltheimer and Vice Chairman Michael Burns, and unsuccessfully attempted to rally other shareholders to elect a dissident slate to the board of directors.

At MGM, he originally opposed a plan to take the studio through a planned bankruptcy and have the heads of film finance and production company Spyglass Entertainment take charge. That pair, Gary Barber and Roger Birnbaum, have been MGM's co-chief executives since it emerged from bankruptcy in December 2010.

Icahn's stake in MGM was 15% at the time, but he increased it to 25% last year, leading to speculation that he would try again to merge it with Lions Gate. But those plans fell apart after Icahn sold his Lions Gate stake last fall amid a flurry of litigation between his investment firm and the Santa Monica studio.

He also briefly had a stake of more than 33% in home video rental and retail chain Blockbuster and tried to buy it out of bankruptcy last year. Blockbuster was ultimately acquired by Dish Network.

Icahn's only remaining involvement in the entertainment industry is an 8% stake in New York video game company Take Two Interactive.

It was not immediately clear how MGM financed the sizable purchase of Icahn's shares. As of March 31, the company had about $200 million in cash on hand, as well as a $500-million debt facility.

However it's possible that the move is connected to an upcoming initial public offering of stock that MGM is planning. The company could sell Icahn's shares as part of the IPO, which could happen by late this year, around the scheduled November release of the next Bond movie, "Skyfall," and December's release of "The Hobbit: An Unexpected Journey," in which MGM has a 50% stake.

A spokeswoman for MGM did not immediately respond to a request for comment.

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