MHR Fund Management LLC files amended Early Warning Report for Lions Gate Entertainment Corp.

NEW YORK, Feb. 5, 2025 /CNW/ - On February 5, 2025, MHR Fund Management LLC ("Fund Management") filed an amended early warning report in accordance with Section 5.2(2)(b) of National Instrument 62-104 – Take-Over Bids and Issuer Bids (the "Early Warning Report") for Lions Gate Entertainment Corp. ("Lions Gate"). The report was filed in conjunction with Fund Management's Schedule 13D filing with the U.S. Securities and Exchange Commission as of the date hereof, a copy of which is available on EDGAR at www.sec.gov. 

The Early Warning Report updates information disclosed in previous early warning reports filed by the Acquiror (as defined herein) on November 16, 2015, July 4, 2016, October 3, 2019, November 22, 2022 and May 14, 2024 (collectively, the "Prior Reports").

Item 1   Security and Reporting Issuer

1.1  State the designation of securities to which this report relates and the name and address of the head office of the issuer of the securities.

This report relates to Class A voting shares, no par value ("Class A Voting Shares") and Class B non-voting shares, no par value ("Class B Non-Voting Shares") of Lions Gate Entertainment Corp. (the "Company"). The Company's head office is located at:

Lions Gate Entertainment Corp.
250 Howe Street, 20th Floor
Vancouver, B.C. V6C 3R8, Canada

1.2  State the name of the market in which the transaction or other occurrence that triggered the requirement to file this report took place.

Not applicable.

Item 2   Identity of the Acquiror

2.1  State the name and address of the acquiror.

MHR Fund Management LLC (the "Acquiror")
40 West 57^th Street, Floor 24
New York, NY, 10019

The Acquiror is a Delaware limited liability company.

2.2  State the date of the transaction or other occurrence that triggered the requirement to file this report and briefly describe the transaction or other occurrence.

This report is being filed in accordance with Section 5.2(2)(b) of National Instrument 62-104 – Take-Over Bids and Issuer Bids to update previous disclosure made in response to Item 6 of the Prior Reports to reflect the Acquiror's expectation that it will enter into the Starz IRA (as defined below), the LG Studios IRA (as defined below), the Starz Voting Agreement (as defined below), the LG Studios Voting Agreement (as defined below), the Starz Registration Rights Agreement (as defined below) and the LG Studios Registration Rights Agreement (as defined below), all as further described in this report in Item 6. The Acquiror expects to enter into the foregoing agreements in connection with the closing of a plan of arrangement resulting in the separation of the business of Lionsgate Studios Corp., a British Columbia corporation ("LG Studios"), from the other businesses of the Company.

This report is being filed in conjunction with the Acquiror's Schedule 13D filing with the U.S. Securities and Exchange Commission as of the date hereof (the "Schedule 13D"), a copy of which is available on EDGAR at www.sec.gov. 

2.3  State the names of any joint actors.

The Acquiror is an affiliate of and has an investment management agreement with MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP, MHR Institutional Partners II LP, MHR Institutional Partners IIA LP, MHR Institutional Partners III LP and MHR Institutional Partners IV LP (collectively, the "MHR Funds"). MHR Holdings LLC ("MHR Holdings") is the managing member of the Acquiror. MHR Advisors LLC ("Advisors") is the general partner of each of MHR Capital Partners Master Account LP and MHR Capital Partners (100) LP. MHR Institutional Advisors II LLC ("Institutional Advisors II") is the general partner of each of MHR Institutional Partners II LP and MHR Institutional Partners IIA LP. MHR Institutional Advisors III LLC ("Institutional Advisors III") is the general partner of Institutional Partners III LP. MHR Institutional Advisors IV LLC ("Institutional Advisors IV") is the general partner of Institutional Partners IV LP. MHRC LLC ("MHRC") is the managing member of the Advisors. MHRC II LLC ("MHRC II") is the managing member of Institutional Advisors II. Mark H. Rachesky, M.D. ("Dr. Rachesky") is the managing member of MHR Holdings, MHRC, MHRC II, Institutional Advisors III and Institutional Advisors IV. As a result, each of Dr. Rachesky, the Acquiror, MHR Holdings, the MHR Funds, Advisors, Institutional Advisors II, Institutional Advisors III, Institutional Advisors IV, MHRC and MHRC II (collectively, the "Reporting Persons") may be considered to be joint actors in connection with the disclosure set out herein.

Item 3   Interest in Securities of the Reporting Issuer

3.1  State the designation and number or principal amount of securities acquired or disposed of that triggered the requirement to file the report and the change in the acquiror's securityholding percentage in the class of securities.

Not applicable.

3.2  State whether the acquiror acquired or disposed ownership of, or acquired or ceased to have control over, the securities that triggered the requirement to file the report.

Not applicable.

3.3  If the transaction involved a securities lending arrangement, state that fact.

Not applicable.

3.4  State the designation and number or principal amount of securities and the acquiror's securityholding percentage in the class of securities, immediately before and after the transaction or other occurrence that triggered the requirement to file this report.

See Item 3.5(a).  

3.5  State the designation and number or principal amount of securities and the acquiror's securityholding percentage in the class of securities referred to in Item 3.4 over which

(a)  the acquiror, either alone or together with any joint actors, has ownership and control,

The Acquiror beneficially owns, through the MHR Funds, 20,127,660 Class A Voting Shares of the Company and 15,105,522 Class B Non-Voting Shares. In addition, Dr. Rachesky directly owns 95,881 Class A Voting Shares and 100,621 Class B Non-Voting Shares.

Collectively, the Acquiror, through the MHR Funds, and Dr. Rachesky own 20,223,541 Class A Voting Shares, representing approximately 24% of the issued and outstanding Class A Voting Shares, and 15,206,143 Class B Non-Voting Shares, representing approximately 10% of the issued and outstanding Class B Non-Voting Shares, in each case, calculated on a non-diluted basis.

In addition, Dr. Rachesky owns 9,915 restricted share units, payable upon vesting in an equal number of Class A Voting Shares, and 11,038 restricted share units, payable upon vesting in an equal number of Class B Non-Voting Shares.

(b)      the acquiror, either alone or together with any joint actors, has ownership but control is held by persons or companies other than the acquiror or any joint actor, and

Not applicable.

(c)      the acquiror, either alone or together with any joint actors, has exclusive or shared control but does not have ownership.

Not applicable.

3.6  If the acquiror or any of its joint actors has an interest in, or right or obligation associated with, a related financial instrument involving a security of the class of securities in respect of which disclosure is required under this item, describe the material terms of the related financial instrument and its impact on the acquiror's securityholdings.

Not applicable.

3.7  If the acquiror or any of its joint actors is a party to a securities lending arrangement involving a security of the class of securities in respect of which disclosure is required under this item, describe the material terms of the arrangement including the duration of the arrangement, the number or principal amount of securities involved and any right to recall the securities or identical securities that have been transferred or lent under the arrangement.

State if the securities lending arrangement is subject to the exception provided in section 5.7 of NI 62- 104.

Not applicable.

3.8  If the acquiror or any of its joint actors is a party to an agreement, arrangement or understanding that has the effect of altering, directly or indirectly, the acquiror's economic exposure to the security of the class of securities to which this report relates, describe the material terms of the agreement, arrangement or understanding.

See Item 6.

Item 4   Consideration Paid

4.1  State the value, in Canadian dollars, of any consideration paid or received per security and in total.

Not applicable.

4.2  In the case of a transaction or other occurrence that did not take place on a stock exchange or other market that represents a published market for the securities, including an issuance from treasury, disclose the nature and value, in Canadian dollars, of the consideration paid or received by the acquiror.

Not applicable.

4.3  If the securities were acquired or disposed of other than by purchase or sale, describe the method of acquisition or disposition.

Not applicable.

Item 5   Purpose of the Transaction

State the purpose or purposes of the acquiror and any joint actors for the acquisition or disposition of securities of the reporting issuer. Describe any plans or future intentions which the acquiror and any joint actors may have which relate to or would result in any of the following:

(a)  the acquisition of additional securities of the reporting issuer, or the disposition of securities of the reporting issuer;

(b)  a corporate transaction, such as a merger, reorganization or liquidation, involving the reporting issuer or any of its subsidiaries;

(c)  a sale or transfer of a material amount of the assets of the reporting issuer or any of its subsidiaries;

(d)  a change in the board of directors or management of the reporting issuer, including any plans or intentions to change the number or term of directors or to fill any existing vacancy on the board;

(e)  a material change in the present capitalization or dividend policy of the reporting issuer;

(f)  a material change in the reporting issuer's business or corporate structure;

(g)  a change in the reporting issuer's charter, bylaws or similar instruments or another action which might impede the acquisition of control of the reporting issuer by any person or company;

(h)  a class of securities of the reporting issuer being delisted from, or ceasing to be authorized to be quoted on, a marketplace;

(i)  the issuer ceasing to be a reporting issuer in any jurisdiction of Canada;

(j)  a solicitation of proxies from securityholders;

(k)  an action similar to any of those enumerated above.

The Class A Voting Shares and Class B Non-Voting Shares reflected in this report were acquired for investment purposes. The Reporting Persons intend to review their holdings in the Company on a continuing basis and as part of this ongoing review, evaluate various alternatives that are or may become available with respect to the Company and its securities. The Reporting Persons may from time to time and at any time (in accordance with any trading policy of the Company or its subsidiaries and affiliates that may then be applicable to the Reporting Persons), in their sole discretion, acquire or cause to be acquired, additional equity or debt securities or other instruments of the Company, its subsidiaries or affiliates, or dispose, or cause to be disposed, such equity or debt securities or instruments, in any amount that the Reporting Persons may determine in their sole discretion, through public or private transactions or otherwise.

In addition to the foregoing, certain of the Reporting Persons are pursuing various alternatives with respect to the Company's securities in order to create liquidity opportunities for limited partners of certain of the Reporting Persons. Among the alternatives being pursued, such Reporting Persons are considering forming a continuation vehicle or other special purpose vehicle that would continue to be controlled by certain of the Reporting Persons that would enable existing limited partners to achieve liquidity or continue their indirect investment in the Company, making an in-kind distribution to certain limited partners of certain of such Reporting Persons, or effecting a public or private transaction. The timing, and whether and how these alternatives can be effected, will depend on transaction and market terms and conditions, as well as legal, regulatory and other factors.

The Reporting Persons reserve the right to and may, from time to time and at any time, in their sole discretion, formulate and implement other purposes, plans or proposals regarding the Company or any of its subsidiaries or affiliates or any of their equity or debt securities as the Reporting Persons may deem advisable in their sole discretion. The information set forth in this Item 5 is subject to change from time to time and at any time, and there can be no assurances that any of the Reporting Persons will or will not take, or cause to be taken, any of the actions described above or any similar actions.

Item 6  Agreements, Arrangements, Commitments or Understandings With Respect to Securities of the Reporting Issuer

Describe the material terms of any agreements, arrangements, commitments or understandings between the acquiror and a joint actor and among those persons and any person with respect to securities of the class of securities to which this report relates, including but not limited to the transfer or the voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Include such information for any of the securities that are pledged or otherwise subject to a contingency, the occurrence of which would give another person voting power or investment power over such securities, except that disclosure of standard default and similar provisions contained in loan agreements need not be included.

Reference is made to that certain plan of arrangement (the "Plan of Arrangement") that will result in the separation of the businesses of LG Studios from the other businesses of the Company, including the STARZ-branded premium subscription platforms, through a series of transactions (the "Transactions"), as further described by the Company on Amendment No. 3 to Form S-4 filed on January 27, 2025, a copy of which is available under the Company's profile on EDGAR at www.sec.gov.

In connection with the closing of the Transactions contemplated by the Plan of Arrangement, the Acquirer and certain of its affiliates expect to enter into the following agreements:

- an amended and restated investor rights agreement with the Company, which generally duplicates the provisions of the existing Investor Rights Agreement (the "Starz IRA"), including board designation and preemptive rights in the Company, in the form set forth as Exhibit 99.1 to and incorporated by reference in the Schedule 13D;

- an amended and restated investor rights agreement with LG Studios, which generally duplicates the provisions of the LG Studios Investor Rights Agreement (the "LG Studios IRA"), including board designation and preemptive rights in LG Studios, in the form set forth as Exhibit 99.2 to and incorporated by reference in the Schedule 13D;

- a voting agreement with the Company, which generally duplicates the provisions of the Voting and Standstill Agreement (as modified to remove those provisions that are no longer applicable) (the "Starz Voting Agreement"), in the form set forth as Exhibit 99.3 to and incorporated by reference in the Schedule 13D;

- a voting agreement with LG Studios, which generally duplicates the provisions of the Voting and Standstill Agreement (as modified to remove those provisions that are no longer applicable) (the "LG Studios Voting Agreement"), and applies such provisions to LG Studios, in the form set forth as Exhibit 99.4 to and incorporated by reference in the Schedule 13D;

- a registration rights agreement with the Company, which generally duplicates the provisions of the Registration Rights Agreement (the "Starz Registration Rights Agreement"), in the form set forth as Exhibit 99.5 to and incorporated by reference in the Schedule 13D;

- a registration rights agreement with the LG Studios, which generally duplicates the provisions of the Registration Rights Agreement (the "LG Studios Registration Rights Agreement"), and applies such provisions to LG Studios, in the form set forth as Exhibit 99.6 to and incorporated by reference in the Schedule 13D.

Upon the entry into the foregoing agreements, the existing Investor Rights Agreement, the LG Studios Investor Rights Agreement, the Voting and Standstill Agreement and the Registration Rights Agreement would all terminate in accordance with their respective terms.

The foregoing descriptions of the Starz IRA, LG Studios IRA, Starz Voting Agreement, LG Studios Voting Agreement, Starz Registration Rights Agreement and LG Studios Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements, which are attached to Schedule 13D as Exhibit 99.1 through Exhibit 99.6 and which are incorporated by reference. 

Item 7   Change in material fact

If applicable, describe any change in a material fact set out in a previous report filed by the acquiror under the early warning requirements or Part 4 in respect of the reporting issuer's securities.

See Item 2.2.

Item 8   Exemption

If the acquiror relies on an exemption from requirements in securities legislation applicable to formal bids for the transaction, state the exemption being relied on and describe the facts supporting that reliance.

Not applicable.

SOURCE MHR Fund Management LLC

For further information and to obtain a copy of the early warning report filed by MHR under applicable Canadian securities laws in connection with the acquisitions, please see Lions Gate's issuer profile on the System for Electronic Document Analysis and Retrieval + at www.sedarplus.ca or please contact Charles Zehren at [phone] or [email protected].