Lionsgate is urging its shareholders to enact a poison pill provision that would make it far more difficult for Carl Icahn’s hostile takeover to succeed.
The mini-major announced Friday that it has set a vote on the measure at a special meeting for shareholders May 4 in Toronto. The poison pill, dubbed a shareholder rights plan, would have the effect of diluting Icahn’s ownership of Lionsgate — currently at 19% — if his holdings top 20%.
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 down 8¢ to $6.22 in mid-session trading Friday.
Icahn has portrayed the poison pill as “totalitarian.” During a segment on CNBC last week, he said, “I’ve seen better votes in a dictatorship.”
Lionsgate announced earlier that it was spurning Icahn’s offer, calling it “financially inadequate and coercive.”
In the Friday letter to shareholders, the company said, “The purpose of the shareholder rights plan is to ensure, to the extent possible, that all of Lionsgate’s shareholders are treated equally and fairly in connection with attempts to acquire effective control of the company, because those transactions may be structured in a manner that results in shareholders being subject to undue pressure in choosing whether to sell their shares.”
Icahn is the second largest Lionsgate shareholder, after Mark Rachesky, a former Icahn associate who owns just under 20% and is a board member.
Lionsgate and Icahn had been tussling over Lionsgate’s decision to make a play for MGM. But Lionsgate bailed out of the bidding on Thursday after MGM reps asked the company to raise its lowball bid, said to be in the $1.3 billion to $1.4 billion range.
Icahn had repeatedly questioned the viability of the offer, asserting that Lionsgate management should be focused on improving its own performance.
A person close to the situation has said the Icahn imbroglio was unrelated to Lionsgate’s decision to bail out of the MGM bidding and that the decision was consistent with Lionsgate’s traditional strategy of opting for lower-priced opportunistic acquisitions.