Lionsgate declines offer

Studio's battle with Icahn far from peace talks

The vitriolic battle between Lionsgate and Carl Icahn shows no signs of coming to an end — and it’s clear that last month’s peace talks went nowhere.

Lionsgate officially turned down Carl Icahn’s revised bid Friday, asserting that his $7 a share offer remains financially inadequate and noted that the hostile offer’s received support of less than 4% of shareholders. The minimajor also instructed shareholders how to withdraw their shares from Icahn’s offer.

Lionsgate made the announcement after the market closed and shares had declined 4 cents to $7.04.

Icahn — who owns 18.8% of the minimajor — had announced three days earlier that he’ll launch a proxy fight to replace the existing 12-member Lionsgate board with his own slate of directors in September. He’s blasted management for “excessive” spending, labelling a provision that would pay $16 million to five Lionsgate execs if they’re ousted “reprehensible”.

He also dropped the requirement that at least 50.1% of the shares be tendered for his offer to go through.

Lionsgate hasn’t commented on the proxy fight but repeated its criticism of Icahn’s bid, characterizing it as a lowball offer and saying that the elimination of the minimum tender condition has exacerbated the “fundamental deficiencies” of the bid, which expires June 16.

Lionsgate noted that its recent earnings report showed “significant improvements” in profitability and cash flow that underscore the inadequacy of the offer. “Views of Wall Street analysts have also changed to reflect a higher value for Lionsgate, and the average price target of Wall Street analysts for Lionsgate shares as of June 3, 2010, is at a 26.4% premium to the Icahn Group’s offer price of U.S.$7 per share,” it added.

The minimajor hasn’t yet set its annual meeting, at which shareholders will vote on board members. It usually holds the event in Toronto in September.

Lionsgate saw a moderate response over the weekend to its most expensive film, action comedy “Killers,” with $16.1 million. Budget’s in the $70 million range with foreign pre-sales bringing the studio’s investment down to about $40 million.

Icahn’s revised takeover bid could result in his disrupting Lionsgate. If his holding grows to 20%, that could trigger a possible default of Lionsgate’s credit line; at 30%, he’d have veto power over any acquisition.

Lionsgate had disclosed on May 17 it had agreed to explore holding formal settlement discussions with Icahn at his request, but neither side has made any subsequent disclosure about the outcome of those talks.

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