Lionsgate advises shareholders to reject Icahn offer


The board of Directors has sent shareholders a recommendation regarding Carl Icahn’s latest buyout offer. You will not be surprised to learn that they urge rejection.

The advisory from the board to shareholders says the offer from Icahn is “highly conditional” and there is “substantial uncertainty for shareholders as to whether, and if so when, the Offer would ever be completed.”

“The Offer is structured to unfairly pressure shareholders to tender,” the board said.

“In particular, a shareholder may be unfairly pressured to tender for fear of being left with Shares after the Company has been damaged by the Icahn Group’s control or potential credit defaults rather than any belief that the Offer is adequate. Since each individual shareholder generally is making its own decision, these impacts become a self-fulfilling prophecy — the threat of debt acceleration or negative control drives shareholders to tender despite their view of value. Key features that were eventually included in the First Tender Offer that protected against such an outcome, including a non-waivable minimum tender condition and a subsequent offering period, have not been included in the Offer,” the message to shareholders said. “Accordingly, the Board believes that the Offer is fundamentally unfair to Lionsgate shareholders and deprives them of the ability to make a meaningful, value-driven decision.”

As in the past, the board said that Icahn’s offer of $7.50 per share – his highest offer yet – still undervalues the company and that current management of the TV/movie production/distribution company is successfully executing its business plan.

Icahn has sued in Canada, where the company is incorporated, to void the poison pill that the board adopted to block his takeover attempt. The latest SEC filing by Lionsgate says a hearing by the British Columbia Supreme Court is set for October 11th.

In addition, Icahn sued in a US federal court in New York to void the debt-for-equity deal that Lionsgate struck in July which diluted Icahn’s equity stake. The company has asked that the US court action be dismissed or at least stayed pending the outcome of the Canadian litigation.