Could 'The Hobbit' be in for more delays?

"Billionaire Carl Icahn is planning to use his insider status to get MGM debt holders to kill a bid by Spyglass heads Gary Barber and Roger Birnbaum to take control of the company, TheWrap has learned.

Instead, Icahn is throwing his weight behind a proposal from Lionsgate that would see the indie studio merge with MGM."

Note-holders have until Oct. 22 to vote on Spyglass' plan, which would push MGM into Chapter 11 and bring Birnbaum and Barber on board as studio chiefs.

On Tuesday the takeover king surprised Wall Street and Hollywood by backing the proposed merger with MGM.

After all, he's been hunkered down in a proxy war with Lionsgate for much of the past year.

In terms of return on investment, it makes sense.


Lionsgate's Summer Success Could Hobble Carl Icahn

Carl Icahn Backs Lions Gate's Proposed Merger With MGM
"Carl is such an incredibly competitive, volatile guy. He woke up at the ninth hour and said, 'I own 30 percent of Lionsgate, 10 percent of the MGM debt -- the best way for me to make money is to put these two companies together,'" Gordon Crawford, a portfolio manager at Capital Research Global Investors and a 9 percent stakeholder in Lionsgate, told TheWrap.

Appeasing Icahn also may explain Lionsgate's rediscovered enthusiasm for the once-fabled, now cash -strapped MGM.

“I can only think that Lionsgate views this as offensive and defensive at the same time," Harold Vogel, head of Vogel Capital Management, told TheWrap. "This is a logical addition to a large library with the potential for creating better efficiencies and pumping more product through their pipeline. At the same time they have a thorn in their side called Carl Icahn affecting their long-term strategies."

Within Lionsgate, executives have long felt a merger with MGM -- whose library includes the James Bond series and pending two-parter, "The Hobbit" -- was a natural fit for its distribution business and movie and TV production arm.

But until now, Icahn's agitation made the bid a remote option for MGM's debtholders.

All that changed on Tuesday. Lionsgate's proposal coupled with Icahn's cheerleading may prove fatal to the ambitions of Barber and Birnbaum, who seemingly had locked up the leadership of MGM in a deal announced last week.

Analysts speculate MGM’s note holders may be more inclined to bet on the higher profile Lionsgate than they are to take a flier on the less established Spyglass -- a company that lacks a distribution arm.

Lionsgate management believes "that they would be better managers of MGM because they have a history of monetizing libraries. Lionsgate has a significant market share in home entertainment for a company their size and they feel they bring a lot to the table,” Marla Backer, a media analyst with Hudson Square Research, told TheWrap.

It could be a good move for Lionsgate shareholders, too.

http://www.thewrap.com/movies/article/threes-company-mgm-lionsgate-icahn-21656