'Poison pill' provision at center of battle over mini-major

Lionsgate and Carl Icahn are ratcheting up their battle for control of the minimajor, with both sides campaigning over Lionsgate’s proposed “poison pill” provision.

Lionsgate has touted the fact that independent proxy advisory firm Glass Lewis & Co had recommended that Lionsgate shareholders vote for what the company’s dubbed its “shareholder rights plan.”

The plan, to be voted on at a May 4 meeting in Toronto, would come into play whenever a hostile bidder gets a stake in the company exceeding 20%. Such investors would suddenly find the value of their shares diluted, while the value of shares held by others would not change.

Icahn, who owns 19% of Lionsgate, said in a regulatory filing Thursday that this poison pill would “frustrate” the ability of shareholders to decide whether to accept his offer.

Frustrated by a stagnant stock price, Icahn is attempting to buy the 81% of Lionsgate that he doesn’t own at $6 a share via a tender offer that expires April 30. Shares were up 5 ¢ Friday to close the week at $6.24.

Icahn has portrayed the poison pill as “totalitarian.” Lionsgate has repeatedly called Icahn’s offer “financially inadequate and coercive.”

The Glass Lewis report said, “In this case, although the Rights Plan does not contain qualifying offer provisions, in our view, the permitted bid provisions adequately ensure that shareholders are able to consider a reasonable offer for the company. Further, we note that the Rights Plan will expire in three years. In light of these shareholder-friendly provisions, we believe that the Rights Plan may serve to protect Shareholder interests in the event that a takeover bid does not reflect the full value of the company’s shares or is coercive.” Icahn, in his Securities and Exchange Commission filing, noted that Lionsgate had never adopted a shareholder rights plan.

“The Icahn Group believes that the Poison Pill seriously prejudices the interests of Lionsgate shareholders by precluding them from exercising their fundamental right to decide whether to tender their Lionsgate shares to the Icahn Offer,” the filing said.

Lionsgate contended in its announcment that the plan is intended to protect Lionsgate and its shareholders from “unfair and coercive” attempts to take over the company. It also said the plan “enables Lionsgate to continue to execute on its current plans to build shareholder value.”

Shares of Lionsgate — home to “Precious” and the “Saw” and Tyler Perry franchises along with TV skeins “Mad Men” and “Weeds” — have been depressed partly by uneven performance of its film slate. “Tyler Perry’s Why Did I Get Married Too” has performed respectably and topped $48 million in domestic grosses in its first 10 days at the B.O.

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