Carl Icahn’s long-running takeover bid for Lionsgate has received a key approval from Canuck regulators, who cleared his hostile offer.
James Moore, minister of Canadian Heritage and Official Languages, disclosed the approval of Icahn’s bid in a statement Wednesday. The review is required since Icahn isn’t Canadian and Lionsgate is based in Vancouver — though it operates out of Santa Monica.
“The investor has shown its willingness to promote Canadian cultural products,” Moore said in a statement. “This decision is good for Canada. It will result in Lionsgate maintaining or increasing Canadian film and television production and protect and preserve Canadian jobs.”
Icahn said in response that he’s agreed to keep the headquarters in Canada and possibly boost the level of production there on a province-by-province basis. He also promised that the company’s Maple Pictures, which distribs its library in Canada, will remain under Canuck control.
The billionaire, who owns 18.8% of Lionsgate, also said Wednesday
that he won’t extend the $7 a share offer past its June 16 expiration or change the price. Icahn has extended the offer six times and announced plans a week ago for a proxy fight to replace the Lionsgate board due to what he’s characterized as “excessive” spending.
Shares were up 5¢ to $7.05 on the New York Stock Exchange. The stock’s up over 21% this year.
In response, Lionsgate reminded its shareholders that its board recommends against Icahn’s unsolicited bid and noting that the offer’s made little headway so far.
“The offer remains financially inadequate and coercive and is not in the best interests of Lionsgate, its shareholders and other stakeholders,” the company said in a statement. “Since the Icahn Group announced their original offer on March 1, 2010, with numerous subsequent extensions, less than 4% of Lionsgate’s outstanding shares have been tendered.”
Icahn’s latest bid drops the requirement that at least 50.1% of the shares be tendered for his offer to go through. The bid values Lionsgate at $825 million.
Lionsgate has noted that its recent earnings report showed “significant improvements” in profitability and cash flow and that its annual spending on its core businesses — $122 million for its most recent fiscal year — amounted to less than 8% of revenues. Its most expensive film, “Killers,” opened below expectations at $15.8 million last weekend with Lionsgate’s exposure at about $40 million of the $70 million budget.
The mini-major hasn’t yet set its annual meeting, at which shareholders will vote on board members. Event’s usually in September in Toronto.
If Icahn’s stake tops 20%, it could trigger a default of Lions-gate’s credit line. At 30%, he’d have veto power over acquisitions.
After Icahn’s offer expires June 16, there will be 14 days for shareholders who have not yet tendered.