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Icahn Terminates Lionsgate Talks

11 Mar, 2009 By: Erik Gruenwedel


Billionaire investor Carl Icahn March 11 reportedly ended discussions with Lionsgate aimed at securing seats on the Santa Monica, Calif.-based mini-major’s board.

Media reports said Icahn, who owns 14.5% of Lionsgate’s shares, and the studio could not come to a resolution over issues involving a standstill agreement.

Public companies often employ a standstill agreement as a hostile takeover defense. In some cases the target firm is willing to purchase the potential raider’s shares at a premium price, thereby enacting a standstill or eliminating any takeover chance.

With Lionsgate’s shares down nearly 50% in the past six months, repurchasing undervalued stock at a premium might be considered an investment in self-preservation, said analysts.

Icahn had partnered with Lionsgate’s largest individual investor, Mark Rachesky, whose MHR Fund Management owns more than 19.4% of Lionsgate, in an attempt to wrest board seats and exert greater influence on the studio’s operations.

Icahn representatives occupy board seats at Blockbuster and Time Warner, among other companies.

Analysts say Icahn’s actions were typical of his operational style that both supports current management while at the same time turning the screws on them.

Doug Creutz, analyst with Cowen & Co. in New York, said Icahn was “clearly seeking a larger say” in the mini-major’s direction.

“[This] is understandable given his increasing financial stake,” Creutz wrote in a research note.

David Miller, analyst with Caris & Co. in Los Angeles, didn’t dispute Icahn was looking for board representation. He did say the ongoing scuttlebutt concerning tensions between the investor and Lionsgate was grist for the media.

“That’s what the media wants to write about,” Miller said. “It’s the sexy story.”

Lionsgate lost more than $94 million in the most recent quarter.

Representatives from Lionsgate and Icahn’s office were not immediately available for comment.


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