Carl Icahn’s temporary truce with the board of directors and management of Lionsgate Entertainment ended at midnight Monday without any settlement of their differences. As a result, Icahn has renewed his takeover bid for the company – but he’s lowered the price.
Instead of his previous offer of $7.00 per share Icahn is now offering only $6.50. There are also lots of conditions – such as elimination of the poison pill that the board recently adopted to thwart Icahn’s acquisition of additional shares.
“Lions Gate’s [sic] latest actions (including the recent implementation of a second poison pill after the first poison pill was struck down by Canadian securities regulators) convince the Icahn Group that it is extremely unlikely that the current management and board of directors of Lions Gate will allow shareholders of Lions Gate to make their own determination on the future path of the company, including decisions to make a major acquisition. The Icahn Group therefore intends to seek to replace all or the lion’s share of Lions Gate’s board of directors with the Icahn Group’s nominees,” Icahn stated in his announcement of the tender for up to all of the company’s shares. He already owns 37.9%. The tender is to run through August 25th unless extended.
“Lions Gate has stated that the acquisition by any person or group of more than 50% of its common shares could result in the acceleration of more than $500 million of its indebtedness if lenders were to declare events of default as a result of this “change in control”. If such acceleration occurs (which will not be a condition allowing the Icahn Group to withdraw the Offer), the Icahn Group believes that Lions Gate will need to immediately secure a replacement source of funding in order to continue to operate its business and avoid bankruptcy. The Icahn Group believes this is a problem of Lions Gate’s own making – had the board of directors not agreed to these controversial “poison put” provisions, the company would not now be facing this very difficult situation. As previously stated, the Icahn Group intends to hold the board responsible for any costs and damages the company might incur from having to obtain emergency financing to alleviate this situation,” Icahn declared.
As for the target company:
“Consistent with its fiduciary duties and in consultation with its financial and legal advisors, Lionsgate’s Board of Directors will review Mr. Icahn’s proposal and will make its recommendation to shareholders promptly. The Board of Directors’ recommendation will be included in a Solicitation/Recommendation Statement filing on Schedule 14D-9. Lionsgate noted that there is no need for shareholders to take any action at this time,” said a statement from Lionsgate.
RBR-TVBR observation: It is hard to imagine that many large shareholders who declined to tender their shares at $7.00 each will be enthusiastic about tendering them for $6.50 each. This is certainly an odd game that Icahn is playing.