Analysts: He needs to offer much more to lure investors

Billionaire investor Carl Icahn will have to pony up at least another $5 per share to get the love he seeks from Lionsgate’s investors.

Icahn’s current tender offer of $7.50 per share, his latest extended bid that expires Dec. 10, is woefully inadequate, some major shareholders said privately this week. An offer of, say, $12.50 might prompt them to sell, they added.

At the same time, Icahn has proposed a slate of five directors for Lionsgate’s 12-member board that he hopes will win approval at the mini-major’s annual meeting Dec. 14 and allow him to chart Lionsgate’s destiny.

Icahn has stubbornly stuck to the $7.50 offer, extending it five times. An Icahn spokeswoman could not be reached for comment.

Clearly, Lionsgate’s current shareholders and Icahn each have their own agendas and views on the company’s value, but an offer of $12.50 per share is not overly inflated, say analysts. “(Icahn’s) $7.50 offer is laughable,” said James Marsh, an analyst with Piper Jaffray. He added that some analysts have a $10 per share 12-month target price on the stock, and that a takeover premium of $2 or so is within reason. The offer of $7.50 represents just about a 2% premium over Lionsgate’s current trading price. (Company’s share price was up 18¢ at the close of trading Wednesday to $7.39.)

It is widely believed that the majority of Lionsgate shareholder base are long-term investors who are holding the stock because they see tremendous upside potential for Lionsgate, said Marla Backer, an analyst with Hudson Square Research. For those shareholders to cash out today, it would take an offer of $12.50 or so, she said.

Lionsgate is an “amazingly complex” company for shareholders to understand, said Piper Jaffray’s Marsh. With a market value of $1 billion, it is considered a small cap stock, yet its various businesses, from a cable channel to movie and TV production, make it seem more like a larger media company. By comparison, Time Warner has a market cap of $33 billion.

“Once an investor is able to size up this company, they take the long view,” Marsh said.

On Friday, the New York Supreme Court is scheduled to hear oral arguments over Icahn’s motion to prevent Lionsgate’s No. 2 shareholder, Mark Rachesky, from voting shares he received as part of a swap-for-equity stake in July that essentially diluted Icahn’s position in Lionsgate.

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