* Lions Gate not planning to raise MGM bid
* Decision reflects Lions Gate withdrawal from auction
* Decision leaves Time Warner, Access in auction
(Adds sources say bids disappointing, shareholder)
By Jui Chakravorty and Sue Zeidler
NEW YORK/LOS ANGELES, March 25 Lions Gate
Entertainment Corp (LGF.N) has decided it will not increase its
offer for Metro-Goldwyn-Mayer, after being told it was outbid
by Time Warner Inc (TWX.N), two sources familiar with the
matter told Reuters on Thursday.
Lions Gate and billionaire Len Blavatnik's industrial
holding company Access Industries had put in second-round bids
ranging from $1.2 billion to $1.4 billion for the famed studio,
but Time Warner outdid them with a $1.5 billion bid, Reuters
reported on Monday.
Time Warner has been seen as the most likely buyer for MGM,
home to the Pink Panther and James Bond franchises.
But even Time Warner's bid might run into obstacles, given
that all the offers have been lower than creditors hoped.
Sources said MGM and its creditors are also considering a
prepackaged bankruptcy without a sale.
Lions Gate's decision to retreat on MGM comes after
billionaire investor Carl Icahn offered to buy Lions Gate,
maker of the "Saw" films, in a move designed to hinder the
studio's bid for MGM. Icahn owns about a 19 percent stake in
"It's not surprising that they have pulled out of the
bidding. Lions Gate did not have the financial firepower to be
competitive in this deal against the likes of Time Warner,"
said Richard Dorfman, managing director for Richard Alan Inc, a
media investment firm with a stake in Lions Gate.
MGM and Lions Gate, home to the "Saw" films, declined
The Lions Gate board has rejected Icahn's offer as
Icahn has said Lions Gate should focus on consolidating
film and TV distribution rather than buying film libraries.
MGM, struggling with $3.7 billion of debt, said in November
it was exploring a potential sale of the company. As the
auction progressed and buyer interest dwindled, sources told
Reuters MGM was considering a prepackaged bankruptcy.
A committee of MGM's creditors met on Tuesday and is
holding discussions with the broader lending community this
The studio, which enlisted turnaround specialist Stephen
Cooper last year to help it restructure, got saddled with the
debt from a 2005 buyout and also has a $250 million revolving
credit facility maturing in April.
MGM, which is home to more than 4,000 film titles, received
a lot of initial interest from rival media companies and buyout
shops, but not all of it has translated into actual offers.
MGM's library also includes a piece of the two "Hobbit"
films to be produced by "Lord of the Rings" director Peter
Jackson. But it has been struggling to create new hits and is
also trying to cope with plunging DVD sales caused by consumers
MGM's debt stems mainly from its buyout in 2005 by a group,
including four private equity firms -- Providence Equity
Partners, TPG [TPG.UL], Quadrangle Group and DLJ Merchant
Banking Partners, a unit of Credit Suisse -- and media
companies Sony Corp (6758.T) and Comcast Corp (CMCSA.O).
(Reporting by Jui Chakravorty in New York and Sue Zeidler in
Los Angeles; editing by Tim Dobbyn and Andre Grenon)