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Image Reiterates Hire of Mergers & Acquisition Consultant

12 Jun, 2006 By: Erik Gruenwedel

Image Entertainment is apparently feeling the heat from its largest shareholder, minimajor Lionsgate.

Chatsworth, Calif.-based Image Monday, in a filing with the Securities and Exchange Commission, reiterated its previous engagement of Lazard Freres & Co., a Los Angeles-based investment banker specializing in mergers and acquisitions.

The filing was in response to a Delaware Court of Chancery ruling June 5, which agreed with Lionsgate's complaint that Image make available for election all board of director seats at its September shareholder meeting.

Lionsgate has formally submitted a slate of directors for consideration by shareholders. Last year, Image rejected as inadequate an $80 million to $90 million offer from Lionsgate.

Analyst David Miller with Sanders Morris Harris in Los Angeles said Image finds itself between a rock and a hard place. He said the company knows that if half the board is replaced it would likely be sold to Lionsgate.

“One of the top five shareholders is saying the company has been mismanaged,” said Miller. “And it looks like the Chancery Court sided with Lionsgate.”

He said Image's hire of Lazard Freres confirmed CEO Martin Greenwald's desire to ultimately sell the company at a price that won't initiate shareholder lawsuits.

“We think Lionsgate will offer that will give [Image] one more time to save face before they take this thing hostel,” Miller said.

Ira Epstein, chairman of the special committee created by the Image board to evaluate outside opportunities, said the distributor remained “fully” committed to finding maximum value for its shareholders.

“Lazard has undertaken a thorough review of Image's business and is currently working with the special committee to … properly assess the best course for Image and all of our stockholders,” Epstein said in a statement.

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