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November 24, 2010
Hollywood studio MGM is pursuing a merger with Spyglass Entertainment, under direction from creditors, following its bankruptcy filing on 3 November 2010. The studio's secured lenders approved a pre-packaged bankruptcy plan in late October to exchange more than $4bn in debt for equity in the reorganised studio, effectively marginalising MGM's existing shareholders. A consortium of Sony Pictures, Comcast and private equity firms bought MGM in 2005 for $4.85bn, but cashflow from the MGM film library proved insufficient to meet debt obligations.
Under the terms of the deal, Spyglass principals will take over management of MGM after the studio emerges from bankruptcy. Spyglass will bring in-development film projects to MGM, although its share of the new company will be less than one per cent. The original merger plan included a five per cent share for Spyglass, owing to the inclusion of the latter's library, though this was dropped during negotiations with financier Carl Icahn, who bought MGM debt to become a voting creditor with nearly 34 per cent of shares. Icahn is still pushing a merger with Lionsgate and that studio has reportedly recently upped its offer to give MGM creditors 55 per cent of the merged company.
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