Lions Gate drops out of bidding for MGM
And then there were two.
Lions Gate Entertainment has dropped out of the bidding for Metro-Goldwyn-Mayer Inc. after being told that its low-ball offer of $1.4 billion was not high enough and would have to be raised to be considered, according to a person close to the situation.
Lions Gate's decision to bail was unrelated to the protestations of activist shareholder Carl Icahn, who has been very vocal about his opposition to the acquisition and has recently launched a hostile tender offer to take control of Lions Gate, the source said.
The exit of Lions Gate as a potential buyer for MGM leaves only two bidders for the debt-ridden studio. Time Warner Inc. submitted an all-cash offer of $1.5 billion, and investor Len Blavatik's Access Industries put an offer on the table that hinges on a restructuring plan to keep MGM a going concern with reduced debt and an infusion of new capital.
Even Time Warner's bid is below the $2 billion or more that MGM's more than 140 creditors are seeking. A number of other companies, including John Malone's Liberty Media and hedge fund Elliott Associates, passed on making second-round offers after determining that the cash flow projections from MGM's 4,000-title library were too low to justify a big investment.
MGM, which was put up for sale last November, could very well opt for a restructuring or stand-alone plan rather than an outright sale, say several people following the auction.
An MGM spokesperson could not immediately be reached for comment.
Lions Gate's move was first reported by The Wall Street Journal.
-- Claudia Eller