Even as he moved to boost his stake in Lionsgate, Carl Icahn said Monday that he is not trying to take over the company but simply wants to exercise more influence over potential acquisitions such as MGM and the Miramax library.
If successful, Icahn’s unsolicited offer would raise his ownership stake from 19% to 29.9%, making him the largest shareholder. He and Lionsgate have been at loggerheads over the mini-major’s spending and acquisition of the TV Guide assets.
Responding to the move, Lionsgate said its board will review the offer and respond promptly, though it didn’t give a specific date. “Lionsgate noted that there is no need for shareholders to take any action at this time,” the company said.
Icahn announced Feb. 17 that he was willing to pay $6 a share for 13.16 million shares, or about $79 million. That’s a 10% premium over Lionsgate’s price, with shares unchanged at $5.45 in trading Monday.
Icahn’s offer also includes a condition that attempts to prevent Lionsgate from making an acquisition priced at more than $100 million.
Icahn’s filing for the offer with the Securities and Exchange Commission includes an extensive recap of contacts over the past year between Icahn and Lionsgate, mostly through vice chairman Michael Burns. Icahn disclosed that last May and June, Burns had discussed Icahn providing financing for an MGM acquisition since Icahn owned some of the MGM debt, but no deal was reached.
The filing also revealed that Icahn and Burns disagreed on the issue of the investor’s desire to gain seats on the 12-member board.
Icahn and his son Brett proposed recently that an Icahn rep join the board and sit on two new committees, one to reduce overhead spending and the other to evaluate spending on production. Icahn also said that he wanted equal status with Mark Rachesky, a former Icahn associate who owns nearly 20% of Lionsgate and sits on the board’s strategic committee.
Icahn also said in the discussions that Lionsgate should obtain approval from at least 40% of shareholders before making any acquisition valued more than $200 million.
According to the filing, Burns told Carl and Brett Icahn that the company was investigating moving its corporate headquarters from Canada. Under Canadian law, eight of Lionsgate’s 12 board members must be Canadian.
If Icahn’s stake tops 20%, it would trigger the possibility of a default in Lionsgate’s senior revolving credit line and acceleration of payments. Icahn spent several months last year threatening a proxy fight but opted to back away by the time that Lionsgate held its annual shareholders meeting in September as shareholders elected all 12 nominees to its board.
Company — home to “Mad Men,” “Weeds” as well as the “Saw” and Tyler Perry franchises — reported last month a loss of nearly $66 million for its third quarter ended Dec. 31 from a 15% increase in revenue of $372 million. But that was an improvement over a loss of nearly $98 million in the same period a year ago.
Lionsgate also announced on Feb. 18 that it was seeking an OK from federal regulators to raise up to $750 million from the sale of securities. The mini-major — now in the second round of bidding for MGM and considering making an offer for the Miramax library — didn’t disclose how it will use the proceeds, but it indicated the funds would provide it with additional flexibility.
Lionsgate is one of six parties in the second round of bidding for MGM; the round isn’t expected to conclude for several more weeks. The value of the offers hasn’t been disclosed, but people close to the situation have indicated that MGM won’t accept a deal for under $2 billion.