Icahn Calls Lionsgate CEO ‘Absurd’24 Mar, 2010 By: Erik Gruenwedel
Tensions between Carl Icahn and Lionsgate ratcheted up March 24 after the activist investor sent the Santa Monica, Calif.-based mini-major’s CEO Jon Feltheimer a terse letter denouncing the rejection of his buyout offer.
Icahn, who owns about 14% of Lionsgate’s common stock, March 19 upped a previous tender offer to include all outstanding common shares for $6 each. That offer was rejected by Lionsgate’s board March 23 as financially insufficient, among other concerns.
Icahn, in the letter, characterized Feltheimer’s “patient, disciplined strategy” to build a strong and diversified company as “absurd.”
New York-based investor Icahn, who has made a career of acquiring stakes in companies and then turning the screws on management, said Lionsgate’s shares have steadily fallen following a brief spike with the acquisition of Artisan Entertainment in 2004.
“I believe the stock would have continued declining if I had not acquired 1,236,938 shares between Feb. 5, 2010 and Feb. 11, and then announced a tender offer on Feb. 16,” Icahn wrote. “You claim that I offer no ‘meaningful vision’, thereby implying that you have one. I cannot help but wonder why your ‘vision’ – if so ‘meaningful’ – never translated into shareholder value?”
The investor said his strengths revolve around implementing strong management teams and holding them accountable in the companies he is involved in.
Icahn said the fact Lionsgate’s shares have remained stagnant and declined over the past five years implies that “clearly something is wrong.”
Specifically, Icahn is upset that Lionsgate wants to acquire significant third-party content catalogs, including a reported $1.3 billion offer for MGM titles.
Lionsgate generated a record $95 million in home entertainment revenue in its most recent quarter, largely due to DVD/Blu-ray Disc catalog releases.
“This is simply another delusion in my opinion, as library values are currently in a secular decline, never to return to cash flows seen during the heyday of DVD sales,” Icahn wrote.
A Lionsgate representative was not immediately available for comment.