Lions Gate to meet with MGM in next few days: sources

LOS ANGELES (Reuters) - Lions Gate Entertainment Inc plans to meet with Metro-Goldwyn-Mayer in the next few days to present a proposal to combine the two studios once MGM, emerges from bankruptcy, two sources familiar with the matter said on Monday.

Separately, Lions Gate, which produces the “Saw” movies and “Mad Men” series, on Monday set the date of its annual meeting for December 14 following a long drawn out effort to thwart hostile suitor Carl Icahn, who has a 33.5 percent stake in the company. In the past Icahn has threatened a proxy battle.

But in recent weeks, billionaire Icahn, also a debt holder in MGM, has been working with Lions Gate in advocating a merger between that studio and MGM.

One source said Lions Gate would be pitching its case to MGM this week as part of a negotiated agreement between MGM, home to the James Bond films, and dissident creditor Icahn.

Lions Gate and MGM declined comment. Icahn was not available for comment.

Icahn holds more than $600 million in MGM debt, making him one of the company’s largest debt holders. He agreed to support MGM’s prepackaged Chapter 11 bankruptcy last week after the studio made several changes to its reorganization plan.

The plan, approved by creditors, included changes such as giving Icahn a board seat and an informal agreement to discuss a possible merger with Lions Gate, sources familiar with the matter said.

Icahn has separately mounted a hostile $7.50 a share takeover bid for Lions Gate and was recently sued by the company for allegedly “plotting” a merger of Lions Gate with MGM that would boost the value of his holdings in the two companies. He has denied the allegations.

The source familiar with the matter said that Lions Gate and Icahn are discussing potential settlements.

Both Icahn and Lions Gate recognize that a proposed merger of Lions Gate and MGM would carry more weight if the two sides settle their legal differences to form a more unified front, he said.

MGM’s Chapter 11 filing last week followed a vote by creditors to support a prepackaged bankruptcy in which it will shed more than $4 billion of debt and hand control to its secured lenders.

MGM management would be assumed by Gary Barber and Roger Birnbaum, who run the Spyglass Entertainment film company, and have been instrumental in reaching an agreement with Time Warner Inc’s Warner Bros Pictures and the director Peter Jackson to make two movies. The movies, estimated to cost $500 million, are based on J.R.R. Tolkien’s novel “The Hobbit.

The MGM reorganization calls for secured lenders including Credit Suisse Group AG and JPMorgan Chase & Co to swap more than $4 billion of debt for equity, giving them ownership of most of a reorganized company.

MGM, known for its roaring lion logo, has struggled with too much debt since 2005 when it was sold in a $2.85 billion leveraged buyout.

A hearing to confirm MGM’s reorganization plan and set it on the road to exiting bankruptcy is scheduled for Dec 2.

The Los Angeles-based company and roughly 160 affiliates sought protection from creditors with the U.S. bankruptcy court in Manhattan. Judge Stuart Bernstein was assigned to the case.

On Monday, MGM sought bankruptcy court approval for a $500 million loan to facilitate its emergence from Chapter 11.

Editing by Carol Bishopric