Lionsgate opts out of MGM bidding

Move leaves Time Warner, Leonard Blavatnik in the running

Lionsgate's bid to purchase MGM for somewhere between $1.3 billion and $1.4 billion is over for now, people familiar with the situation confirmed Thursday.

In a move that might have prompted a grin from Carl Icahn, sources say Lionsgate has no intention of raising its offer, leaving two others to compete for the storied but heavily indebted studio.

Those two are Time Warner and Leonard Blavatnik and his Access Industries. Those with knowledge of the situation say Time Warner is high bidder at $1.5 billion. But with $7.5 billion, making him the 93rd richest man in the world, according to Forbes magazine, Blavatnik is by no means out of the running.

Blavatnik is an Ivy League-educated American immigrant from Russia whose Access Industries holding company has stakes in energy and mining concerns as well as a growing list of media assets.

Via Access Industries, Blavatnik, a former Warner Music Group board member, bought the U.K. portion of Mel Gibson's Icon Group last year and has purchased stakes in WMG, Russian TV company Amedia, Israeli TV concern R.G.E. Group and the U.K.'s Top Up TV, among others.

Insiders say News Corp. also has offered to purchase a stake in MGM for $250 million. Plus, there are two camps developing among MGM's creditors: one wants to take the high bid, the other wants to raise more cash, do some restructuring and keep MGM independent.

"There's a couple of ways to make it a standalone company, but a bankruptcy probably is in the cards unless they sell it," a source said.

Lionsgate's bid for MGM, which sports about $3.7 billion in debt, came despite objections from Icahn, the billionaire financier who owns 19% of Lionsgate and has offered to buy the entire company for $6 a share.

Lionsgate has dismissed Icahn's offer as too small -- the stock closed at $6.30 on Thursday -- and Standard & Poor's ratings service warned that Icahn taking control of the company could trigger a default of banking covenants, putting the studio's credit rating at risk.

Icahn's strategy to force his will on Lionsgate also involved a letter of rebuke aimed at CEO Jon Feltheimer in which he called Lionsgate's bid to buy MGM "absurd."

As it stands now, Icahn appears to have won at least that particular battle. But a source familiar with the situation said Lionsgate "is not closing the door on MGM, though they're not going to revisit it at a higher price, either."

"They're a patient company. They're not going to chase assets," the source said.

MGM had no comment Thursday except to reiterate what it said Monday -- that it has received "a number of bids as part of its ongoing process of exploring strategic alternatives."

MGM also said it expects to seek a forbearance agreement for a revolving line of credit, for which a payment is due April 8. It also is trying to extend the current forbearance period on its bank debt that ends Wednesday.

Access Industries did not return calls or e-mails seeking comment.
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