Carl Icahn has dropped his bid to buy out any and all other shareholders of Lionsgate Entertainment for $7.50 per share. The move came a day before Lionsgate’s annual shareholders meeting on Tuesday (12/14), where five Icahn-backed candidates are vying for seats on the 12-member board.
Icahn’s buyout bid had been conditioned on a New York court granting an injunction which would have blocked an investment fund controlled by Mark Rachesky, a member of the Lionsgate board, from voting the new shares it acquired in a debt-for-equity swap in July which diluted the voting power of Icahn, Lionsgate’s largest shareholder. The court on Friday (12/10) declined to issue the injunction sought by Icahn. The billionaire investor has now dropped his offer to buy other shares for $7.50 and none of the shares tendered to him will be purchased.
“We are disappointed that our motion for a preliminary injunction barring the voting of the shares issued to director Mark Rachesky was not granted, but we are pleased that the judge agreed to hold a full trial on the matter within the next several months and will require Lions Gate [sic] to hold a meeting of shareholders again in September 2011 following his ruling in the case. We will continue to monitor the situation at Lions Gate and will aggressively take all actions necessary to protect our investment, and we reserve all of our rights with respect to Lions Gate and its securities. We are pleased that ISS agreed with our view that change is necessary at Lions Gate and recommended that shareholders do not vote on management’s blue proxy card. We recognize that it is now virtually impossible for us to prevail in the proxy contest due to the dilutive transaction in question. Nevertheless, we encourage shareholders to voice their dissatisfaction by voting for our slate of nominees on the GOLD proxy card. We thank all those who have voiced support for our effort,” said a statement Icahn issued on Monday.
But while Icahn will not have the voting power he’s hoped for at Tuesday’s meeting, he is pressing forward with his five candidates – and the Lionsgate board is continuing to push back. “Do not risk the future of our Lionsgate investment,” the board said in another letter to shareholders dated Friday (12/10). “Time is of the essence. Your Board urges you to please vote for Lionsgate’s director nominees on the blue proxy card today and to discard the Icahn Group’s proxy materials.”
The firms which advise institutional investors on how to vote in such elections are split on Tuesday’s balloting. Only Egan-Jones has endorsed all five Icahn candidates and criticized the Rachesky deal to entrench current management. Institutional Shareholder Services criticized the performance of Lionsgate and its corporate governance, but backed only three of the Icahn’s five nominees. Glass Lewis was negative on the company’s performance as well, but said Icahn had no clear plan to rejuvenate Lionsgate and refused to endorse any of his board candidates.
RBR-TVBR observation: We doubt that the war to claim control of this TV/movie studio is over. The current Lionsgate board won a battle on Friday. Now we’ll see how Tuesday’s battle comes out.