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Icahn Ups Tender Offer for All Lionsgate Shares

19 Mar, 2010 By: Erik Gruenwedel

Carl Icahn’s interest in Lionsgate just got serious.

The activist investor, who owns 19% of Lionsgate common stock, March 19 said he is amending a previous $79 million tender offer to now include up to all of the Santa Monica, Calif.-based mini-major’s outstanding shares.

Icahn, who is extending the revised offer deadline to April 30, said he wants Lionsgate to switch its focus on acquiring library content in light of declining DVD sales, among other issues.

If his offer is accepted, Icahn said he would insert his own board nominees and institute changes in Lionsgate management, which is currently headed by CEO Jon Feltheimer.

Lionsgate, which generated $95 million in home entertainment revenue in the most recent quarter, largely due to catalog, has reportedly been eying library acquisitions from Miramax and MGM.

“It should be up to the shareholders to determine if they wish to more than 'double down' on another library,” Icahn said in a statement. “I believe library values are currently declining due to, in part, weak DVD sales.”

Characterized as “financially inadequate and coercive,” Lionsgate’s board of directors March 12 recommended that shareholders reject Icahn's offer to purchase more than 13 million common shares for $6 each.

In rejecting the tender offer, the board said Icahn was, in effect, seeking to acquire control of Lionsgate for less than $80 million. The board also enacted a so-called “poison pill” designed to protect shareholders from hostile take-over by a third party.

“[Lionsgate] previously criticized our tender offer for being partial,” Icahn responded. “That is no longer the case.”

The investor said he also intends to pursue legal proceedings to set aside the poison pill, which he said restricts shareholders from accepting the offer.

New York-based Icahn’s original offer would have upped his ownership stake in the studio to 30%, thereby allowing him significant clout on management, including possibly forcing expedited repayment of a credit facility, among other provisions.

Lionsgate had borrowings of approximately $44 million under its credit facilities, and $472.1 million in long-term notes, as of a March 8 filing.

"I understand that such a dramatic shift in management and growth strategy may thrust [Lionsgate] into a potentially volatile period of transition, but I believe the company will emerge much stronger on the other end," Icahn said.

Lionsgate shares were up slightly in mid-morning trading.

A Lionsgate representative was not immediately available for comment.

The Lionsgate board, in a statement, said it would review the revised offer and will make its recommendation to shareholders promptly.

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