Carl Icahn has won a partial victory in his battle for control of the Lionsgate board as Institutional Shareholder Services backed three of his five nominees.
ISS, viewed as the most influential proxy advisory firm, issued the recommendation Thursday — five days before Lionsgate holds its annual meeting to elect a 12-member board.
ISS endorsed three Icahn nominees — producer Jay Firestone, former BMG exec Michael Dornemann and Icahn Enterprises president Daniel Ninivaggi. ISS did not recommend two Icahn nominee — former Overture and MGM exec Chris McGurk and former Princeton University president Harold Shapiro.
Lionsgate called the ISS recommendation “disappointing” and noted that the Glass Lewis advisory firm bas endorsed its full 12-member slate.
Icahn noted in an announcement that ISS had slammed July’s $100 million debt for equity swap that cut Icahn’s stake from 38% to 33%.
“The board has demonstrated a disturbing concern with gaining tactical advantage over one large dissident shareholder, yet in the process demonstrated little regard for the collateral damage – particularly from heavily dilutive insider transactions in July – to other, unaffiliated shareholders,” it said.
“The company’s performance over the past five years underscores doubts about its pace toward profitability and its execution, if not quite the strategic vision itself.” ISS also said. “Combined with the
poor comparative shareholder returns over the past five years – meaningfully worse than
peers even despite the significant uplift provided by the Icahn tender offers – we believe
the dissidents have met the burden of proving some change is necessary.”
Icahn said he was “gratified” by the ISS announcement and added, “It is our belief that the company and our investment will continue to deteriorate if Lions Gate continues on its current path.”
ISS also rejected two of the 12 Lionsgate nominees — Arthur Everensel and Daryl Simm. It noted both had served on the compensation committee and criticized the severance package worked out for Lionsgate chief executive Jon Feltheimer.
ISS explained its decision not to endorse all five Icahn nominees by saying, “The dissident has not demonstrated a case so compelling that justifies supporting a near-control slate particularly as the dissident also has a hostile tender offer outstanding which most shareholders have found too low.”
Icahn’s extended his hostile tender offer of $7.50 a share five times. The current offer expires Friday.
The Glass Lewis report was critical of Icahn and the “substantial absence” of a specific plan for Lionsgate other than Icahn’s desire to merge Lionsgate with MGM.
“We see no disclosure that suggests that the Dissident nominees have a framework around which to build an improved Lions Gate,” Glass Lewis said. “To the contrary, the only plan that may reasonably be implied by available disclosure is the potential combination of the Company and MGM, a notion buttressed by the Dissident’s substantial debtholding in MGM, his staunch opposition to MGM’s combination with Spyglass Entertainment, and his nomination of Christopher McGurk, a former vice-chairman of MGM, to the Lions Gate board. In our view, these circumstances raise, at a minimum, concerns about conflicts of interest and the ultimate intentions of the Dissident.”