Activist shareholder Carl Icahn raised the stakes in his yearlong dispute with Lions Gate Entertainment Corp. on Friday, launching an all-out bid to take over the movie studio following disagreements over its spending.
The hostile bid comes a week after Lions Gate rejected Icahn’s offer to buy a larger stake and rewrote its bylaws to make such a takeover attempt more difficult in the future.
Icahn owns almost 19 percent of Lions Gate, and his tender offer of $6 a share last month would have raised his stake to nearly 30 percent. That bid represented a 15 percent premium over the stock’s latest closing price at the time.
Lions Gate management has argued that Icahn’s bid undervalues the studio and that a larger stake would have given Icahn too much say in major decisions, at the detriment of other shareholders. The company also warned that a change in control could trigger a default in a $340 million credit line from JPMorgan Chase & Co. because it would amount to a change in control.
Now, Icahn is bidding for a majority stake in the company and said he is willing to buy all outstanding shares.
Icahn left his offer at $6 per share on Friday, just a few pennies more than Thursday’s closing price of $5.97.
Lions Gate had about 117.8 million shares outstanding as of Feb. 1, according to a recent securities filing, meaning Icahn would be willing to spend about $570 million for the portion of the company he doesn’t already own.
Icahn is conditioning his offer on winning at least 50.1 percent of the company’s stock. And it would only be valid if shareholders or the courts strike down the so-called poison pill that the company’s board has approved.
That provision, which took effect last week, triggers whenever any hostile acquirer gets a stake in the company exceeding 20 percent. Under a shareholders rights plan adopted by the company’s board, such investors would suddenly find the value of their shares diluted, while the value of shares held by others would not change.
Shareholders are expected to approve the measure in May, but Icahn said Friday that he will challenge it in court.
Lions Gate, which is based in Vancouver, Canada, but operates out of Santa Monica, Calif., was behind the Oscar-nominated movie “Precious: Based on the Novel ‘Push’ By Sapphire” and owns the TV Guide network.
The tussle between Icahn and Lions Gate management has been going on for more than a year and comes as Lions Gate is looking into buying the Metro-Goldwyn-Mayer Inc. studio and The Walt Disney Co.’s Miramax Films division. MGM is set to receive binding offers Friday.
Icahn wants to restrain the studio’s spending and said Friday that shareholders should have a chance to vote on whether such a purchase is wise. He argued against buying another studio — and the library of older titles that come with it.
“I believe library values are currently declining due to, in part, weak DVD sales,” he said.
Messages left with a Lions Gate spokesman were not immediately returned.
Source: The Associated Press.