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Lionsgate Sells Image Stock

2 Apr, 2007 By: Erik Gruenwedel

Lionsgate has sold its entire stake of common stock in Image Entertainment for about $16.5 million, according to an April 2 filing with the Securities and Exchange Commission.

The Santa Monica, Calif.-based mini-major owned 18.7% of the Chatsworth, Calif.-based distributor, making it the second largest and most contentious individual shareholder.

Image last Friday announced it had accepted an acquisition offer of about $132 million from an investment company led by film financier and producer David Bergstein — owner of ThinkFilm and U.K.-based Capitol Films.

Lionsgate's shares were sold at prices ranging from $4.16 to $4.26 per share. The studio sold an additional 123,500 shares of Image stock March 13 and 14 for about $390,000.

“Yes, we're out of Image,” confirmed a Lionsgate spokesperson.

One analyst said Bergstein's $4.40 per share offer exceeded most market estimates by at least 10 cents per share.

“[Greenwald] was a good sales guy,” said the analyst, who wished to remain anonymous.

The mini-major last year attempted unsuccessfully to acquire Image with three unsolicited offers. Then last fall, Lionsgate submitted a slate of board candidates to Image's annual shareholder meeting in an attempt to usurp control of the board, which included Image CEO Martin Greenwald.

The studio claimed the board was not doing enough to maximize shareholder value.

The contentious campaign included Lionsgate erecting a Web site outlining how it would improve Image, and Greenwald, in a blunt letter to shareholders, responding by declaring that Lionsgate's rhetoric and actions had made Image unprofitable in fiscal 2006.

Despite two separate proxy firms withdrawing support for the incumbent board, Image shareholders narrowly rejected Lionsgate's slate.

Following the acquisition announcement, analyst David Miller with Sander Morris Harris in Los Angeles said it was possible Lionsgate could have voted against the sale and used its leverage to extract a higher purchase price from Bergstein.

In end, apparently, Lionsgate just wanted to cash out.

“It creates a nice, below-the line gain for Lionsgate,” said Miller. “Cost (share purchase price) for Lionsgate we believe was in the high $2's. A 62% return is outstanding by any benchmark.”

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