Shareholding increases to 31.8%

Carl Icahn is building an arsenal for a nasty proxy fight with Lionsgate. He made it official on Thursday that his stake in the company has risen to 31.8% through his tender offer.

Reacting swiftly to news that Icahn had become its largest shareholder, Lionsgate noted that shareholders repping 68% of the stock had spurned Icahn’s hostile offer.

The activist investor’s stake had been at 18.8%. He disclosed that another 13.2% of shares worth $109.2 million had been tendered for his $7-a-share offer — slightly more than the 12.5% figure he’d announced Wednesday, when the offer expired.

Lionsgate rose 19¢ to $7.12 on the New York Stock Exchange. Shares have gained 23% this year.

“Four months have passed since the Icahn Group announced its intention to make a tender offer, and after repeated extensions, numerous changes to its tender offer and a barrage of unwarranted attacks on the company, including personal attacks on the board and management, the Icahn Group remains a minority shareholder,” Lionsgate said in a statement Thursday. “The vast majority of our shareholders have yet again demonstrated that they are serious about protecting the value of their investment in Lionsgate.”

Icahn can gain more shares for the next two weeks, as other shareholders will still be able to tender their shares to him until June 30. He promised last week that he’d launch a proxy fight, blasting the board’s support for management and accusing Lionsgate of overspending and failure to adjust to changing circumstances.

Lionsgate’s asserted that Icahn’s hostile bid is a lowball offer that ignores improvements in the mini-major’s performance. It’s also portrayed Icahn as an incompetent meddler who’s driven down the value of past investments.

If Icahn’s ownership stake reaches 33%, he will have the power to veto any mergers or acquisitions. That threshold would trigger a change-of-control clause in the employment contracts of top Lionsgate managers, who could opt to ankle with lucrative severance payments.

For now, Lionsgate is expected to obtain a waiver from lead lender JPMorgan Chase, since Icahn’s ownership of more than 20% could cause a default in its credit facilities and require it to make accelerated payments on its debt. Lionsgate said Thursday that it was in “advanced discussions” with its lenders on that issue and said it was confident that it will obtain a waiver.

Icahn asserted that Lionsgate had “made no mention of its plans to deal with possible defaults” and added that the directors “have only themselves to blame for the predicament in which Lionsgate now finds itself.”

Vancouver-based Lionsgate usually holds its annual shareholders meeting in September in Toronto during the Toronto Film Festival. Icahn’s suggested that the meeting be held as soon as possible.

Icahn’s bid values Lionsgate — home to Tyler Perry’s pics and TV shows, the “Saw” horror franchise as well as such cable skeins as “Weeds” and “Mad Men” — at $825 million. The two sides have been battling for more than a year, ever since Lionsgate refused to seat Icahn and his reps on its 12-member board.

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