Carl Icahn managed to scoop up only an additional 2.1% of the shares of Lionsgate Entertainment with his second tender offer to buy shares at $7 per share. That, however, boosted his stake to 34% and gave him leverage over company management.
Under Canadian securities law, Icahn now holds “negative control” because he holds over one-third of the equity and can block any major transaction – acquisition or sale – that he doesn’t approve of. As the largest shareholder he is also expected to go forward with efforts to replace the current board with directors more to his liking.
Meanwhile, the board and management are applauding the rejection of Icahn’s efforts to acquire outright control.
“We want to take this opportunity to thank our shareholders. Lionsgate’s shareholders have repeatedly confirmed their support for the Board and management’s strategy to grow shareholder value by continuously rejecting the Icahn Group’s financially inadequate offer,” said a statement from the Board of Directors.
The board and company management have maintained that Icahn’s offer was for less than the true value of the TV/movie studio. Indeed, the shares have been trading above the $7.00 offer price.
The biggest threat from Icahn’s unwanted tender was recently removed when Lionsgate’s lenders amended the company’s loan agreement so that Icahn’s larger stake would not trigger a technical default. So, for now Icahn and Lionsgate’s board/management will have to float along in the same boat, with neither being able to get rid of the other.