Lionsgate battle heading to the finish line


Neither the management of Lionsgate Entertainment nor corporate raider Carl Icahn are backing down as Wednesday’s (6/16) deadline approaches for Icahn’s tender offer to buy out any and all other shareholders at $7 per share.

Icahn fired a new warning shot Friday, sending a letter to the Lionsgate board warning that even a modest increase in his ownership stake would trigger an “event of default” under Lionsgate’s credit facilities and, in turn, “cross-defaults with respect to the company’s more than $472 million of bonds outstanding. Icahn noted that even the small number of shares that had been tendered before he extended the deadline would be enough to trigger those events. Icahn also stated that the tender would not be extended again.

Lionsgate fired back with an announcement that it has been in talks with its lenders to seek a waiver or amendment of its credit facilities to prevent any technical default “and is confident of its ability to obtain one in the near future if necessary.” The board of Lionsgate has said that the Icahn offer undervalues the company and has urged shareholders not to tender.

The number of shares being tendered to Icahn has been growing. Billionaire Mark Cuban indicated that he would probably tender his 6.4 million shares. Icahn already owns 18.9% of Lionsgate and Cuban owns 5.4%. The combined total of 24.3% would be well above the 20% trigger for the technical default. Combined with the 4% or so tendered earlier, Icahn’s stake would rise above 28%.

RBR-TVBR observation: Quite a game of poker. Icahn is threatening to pull the financial rug out from under a company in which he is the largest shareholder – and presumably the biggest loser in a default.