WEDNESDAY UPDATE, 12:30 PM: Here’s another potential Lionsgate board member whom Carl Icahn is wrangling — filmmaker Jay Firestone, a one-time vice chairman of Alliance Communications in Canada. According to insiders, it makes sense for Icahn to want an executive from Up North since Lionsgate is based there and in Santa Monica. Also, the two men have movie history together: Fireworks Entertainment, which Firestone started when he left Alliance in 1995, was partnered in IDP Distribution along with Samuel Goldwyn Films and Icahn’s film company Stratosphere Entertainment. Sources tell me Fireworks burned through $100 million in financing from parent company CanWest Global Communications, which in 2003 didn’t renew founding president and CEO Firestone’s 5-year contract. Fireworks initially specialized in genre TV production, then expanded into feature film production and distribution when it was acquired by CanWest, opening offices in LA and London. But it had little success: 1999’s Onegin, 2000’s Rules Of Engagement, 2001’s Rat Race, and 2002’s Who Is Cletis Tout. Fireworks was shuttered by CanWest in April 2004. Firestone now runs Prodigy Pictures.

TUESDAY UPDATE, 1 PM: Carl Icahn right now is assembling his slate of board members hoping to unseat Lionsgate’s current board of directors at the film/TV studio’s scheduled December 14th shareholders meeting in Los Angeles. And I hear that Chris McGurk, the former MGM President and COO and Vice Chairman and Overture CEO, may join Icahn’s proposed slate because of his MGM experience now that Icahn and Lionsgate want that company, too. One of my Lionsgate insiders claims McGurk is lobbying for the board seat. But others tell me Icahn called McGurk out of the blue on Monday morning and offered it to him. Icahn won’t be packing the board with Hollywood types, however: instead, sources tell me he’s going after “people from other industries who are above approach from the SEC” since the crux of his problems with Lionsgate are the board’s alleged SEC violations. As for McGurk, he’ll have to see whether joining the Lionsgate board presents any conflicts of interest now that he’s figuring out his next movie. “He’s playing hard to get, if anything,” an insider tells me.

Usually, a proxy fight like the one Icahn has pledged to wage against Lionsgate is a very expensive proposition that takes months of preparation and involves contacting every shareholder. But this is being done with virtually no time and little expense. Just today, Icahn, who owns 33% of Lionsgate, extended his $7.50-per-share tender offer to December 2nd.

That’s the same day that MGM is supposed to receive confirmation of its pre-packaged bankruptcy plan. Icahn owns 15%-18% of MGM’s debt. There continue to be reports of an Indian company, and a Chinese company sniffing around, as well as Lionsgate, who may make another play for MGM. I’m told by a source that Lionsgate’s merger proposal is “gaining a lot of steam with many of the hedge funds in the credit. Not sure where the Big Four stand (Highland, Anchorage, Davidson Kempner, and Solis) but for many of the hedge funds, a merger with LGF gives them a liquidity option.” Meaning the MGM creditors will own a public stock that they can sell whenever they want to — a big plus. But “$500 mil plus 55/45 won’t get it done. They will probably have to raise the offer to 60/40 and demonstrate that the merged entity is viable.”

As for McGurk, he most recently was CEO of Anchor Bay Entertainment. McGurk was with MGM from 1999 to 2005 and was responsible for all operating and planning activities for the Motion Picture Group, as well as all international operations, worldwide home entertainment, exhibition (UCI and Loew’s Cineplex), October Films and Polygram Filmed Entertainment. According to his official bio, McGurk “played the leading role in MGM’s reinvigoration, spearheading efforts that resulted MGM’s industry leadership in Home Entertainment library sales, marketing and distribution. Mr. McGurk maximized the asset value of Hollywood’s largest modern film library, transformed the Hollywood’s largest modern film library’s United Artist’s label into a specialty film unit and negotiated strategic alliances with Twentieth Century Fox and NBC.”

So let’s look at the last 6 months regarding Icahn and Lionsgate and MGM:

After the failed auction sale, MGM creditors explored every avenue. Lionsgate was talking to them about a merger since June, trying to get real financials as well as a governance plan. (Later press reports saying MGM creditors had rejected Lionsgate’s proposal were not accurate.) Icahn, in the midst of his Lionsgate battle, opposed the idea and publicly likened Lionsgate’s desire to merge with MGM to overstretched homebuyers. “It’s analogous to a couple not being able to pay their mortgage on a little house and starting to negotiate on a big, overpriced mansion that’s rumored to be haunted.” By June 21st, the MGM Steering Committee’s support of the Spyglass plan was leaked. The hedge fund guys with big MGM debt also like the fact that Spyglass’ Gary Barber and Roger Birnbaum have figured out how to operate successfully with its money from Cerebrus. (Others think it was a disaster) No matter: that money is due to run out which is why Spyglass wants to run MGM. 

On July 13th, Lionsgate submits a merger proposal to MGM lenders. At the same time, Icahn moves to replace Lionsgate’s board and management. By the 3rd week in August, Spyglass is the leader to take over MGM after it gives a detailed presentation to the full lender group and starts meeting with everyone involved with MGM even before the non-binding letter of intent is accepted by the Board which at this point is still in control legally, but has no equity. The Steering Committee is clearly calling the shots, looking at MGM as a long-term investment.

In September, Spyglass helps get Peter Jackson and The Hobbit back to back movies on track. People start asking questions how the company can move forward on this and pay the pre-production bills. But, at this point, MGM acctually has cash on hand because it has not been paying interest on the debt.

In October, the Lionsgate-Icahn drama heats up yet again. Harry Sloan facilitates the Lionsgate/Icahn MGM mating dance, out of loyalty to his best friend Jon Feltheimer, even though it puts himself directly at odds with the Steering Committee which has settled on Spyglass. But thata’s Harry in a nutshell. On October 12th, Icahn blesses the idea of a Lionsgate merger. At the same time, Icahn is litigating in Canadian courts against the Lionsgate/Marc Rachevsky stock maneuver that diluted his holdings. Remember, it was only in June that he publicly berated Lionsgate for pursuing MGM. On October 15th, Mary Parent leaves MGM. So classy, what a bummer. Spyglass is in control for all intents and purposes.

On October 21st, Icahn announces his first MGM debt tender offer at $.45 on the dollar from lenders that commit to voting against Spyglass plan. The next day, the MGM lender vote deadline is extended to Oct ober 29th so lenders can review, again, the Lionsgate merger plan. In late October, Lionsgate files papers to upend the Spyglass plan, claiming that MGM blocked their actions and dismissed their merger plan. MGM counters with papers that clearly show Lionsgate never provided an assurance that Icahn and Rachesky were in agreement on governance/business structure, never provided support for their financials, and never realized it would take many more months to provide all of this. (The Lionsgate proposal read only that “we fully anticipate” that Icahn and Rachesky would be on board.)

True to form, Icahn on October 26th ups his tender offer for MGM debt to $.53 on the dollar.

On October 28th, Lionsgate slaps Icahn with a lawsuit, accusing him of being both a corporate raider and a double agent. The suit accuses Icahn of trying to delay the MGM vote so that he can buy more of the MGM debt and score big profits in the event of a merger.

The next day is the MGM lenders’ voting deadline. (The Los Angeles Times jumped the gun and reported that Icahn voted in favor of the plan, when in fact, he voted against it. I hear they were misled by three Icahn sources. At this point Icahn’s MGM holding is roughly 15%-18%, not the much higher numbers which other media outlets were reporting.) The vote still passed overwhelmingly, although the two sides negotiated throughout the weekend to get Icahn on board. They did not want him blocking anything at filing. The modification: Icahn thought that Barber’s and Birnbaum’s library was overvalued and therefore their equity share was too high. Barber and Birnbaum withdrew the library, which sliced their equity share significantly, in exchange for Icahn converting his vote to favorable and getting a board seat. The modifications were perceived as immaterial to the overall plan, allowing the planned pre-packaged bankruptcy filing to proceed.

Which brings us to this month. On November 3rd, the pre-packacked bankruptcy filing, including the Icahn modifications, is approved. Talks also begin with MGM’s landlords about space reduction, specifically giving back between 75K-100K square feet. With so many people gone, mostly through attrition, there’s no need for such an expense.

I hear very confidentially that Lionsgate Vice Chairman Michael Burns blew the Icahn talks so he’s still coming after Lionsgate. On November 9th, Lionsgate presents a new plan to the MGM lenders, but no studio people are in attendance. Bizarrely, Icahn attends the NYC premiere of Lionsgate’s The Next Three Days (which bombed in theaters this last weekend).

On November 12th, Bankruptcy Court validates all of the motions, including the modifications. The next hearing is December 2nd to confirm MGM’s pre-packaged bankruptcy, the same day that Icahn’s most recent $7.50 tender offer for Lionsgate shares expires.