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Lionsgate Shareholders Reject Icahn Offer

11 May, 2010 By: Erik Gruenwedel

Carl Icahn

With less than 6.5% of its common shares tendered, Lionsgate May 11 said its shareholders have overwhelmingly rejected activist investor Carl Icahn’s attempt to acquire all common shares for $7 per share in a hostile bid to assume control of the Santa Monica, Calif.-based mini-major.

Icahn, who owns about 14% of Lionsgate’s common stock, last month increased his unsolicited bid for the studio nearly 17% from his previous offer of $6 per share.

“Lionsgate’s shareholders have demonstrated that they believe the Icahn group’s offer is inadequate and does not reflect the value of their investment,” the company said, in a statement.

Analyst David Miller with Caris & Co. in Los Angeles has stated that a fair price for Lionsgate is around $9 per share, or 30% above the May 10 closing price of $6.91 per share.

The studio is holding a special meeting for shareholders May 12 in Toronto to ratify provisions of a shareholder rights plan, or “poison pill,” often enacted to prevent hostile takeovers.

A shareholder rights plan typically allows shareholders (other than the hostile bidder) to acquire large quantities of common shares in an effort to dilute the percentage of shares owned by the bidder (Icahn).

Icahn’s bid received a boost last week when the British Columbia Securities Commission ruled against Lionsgate’s plans for a poison pill provision.

Icahn, who extended his $7-per-share-bid to May 21, hailed the ruling, calling efforts by Lionsgate’s board a “flagrant” waste of shareholders’ money and worthy of an “Oscar.”

Citing strong DVD/Blu-ray Disc catalog sales and digital distribution, including video-on-demand (VOD), Lionsgate April 29 said preliminary pre-tax earnings for the fiscal year (ended March 31) will exceed $115 million.

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