With Lionsgate pondering a possible binding offer for MGM this week, the mini-major’s gearing up for a battle with Carl Icahn over the merits of such a deal.
Lionsgate officially attacked on Friday, blasting Icahn’s unsolicited bid to boost his stake in the company from 19% to 29.9% as being too low and coercive. Icahn’s tender offer, launched March 1, includes a provision preventing Lionsgate from any acquisition that costs more than $100 million.
MGM has set a Friday deadline for binding offers on the debt-ridden company, whose pricetag is expected to be about $2 billion. Lionsgate is one of six parties in the second round of bidding for MGM.
Lionsgate also disclosed that its board adopted a “poison pill,” or shareholders rights plan, that would be triggered if any person or group tries to acquire more than 20% of the company’s stock. The plan, which would create additional shares and dilute the stock, would have the effect of making Icahn’s bid more costly.
Icahn launched the unsolicited offer at $6 a share — which Lionsgate management contends isn’t fair value for the stock. Shares of Lionsgate were up 10¢ to $5.77 in trading Friday.
Icahn had no comment, but he said recently that he’s not trying to take over the company but simply wants to exercise more influence over potential acquisitions such as MGM and the Miramax library.
Lionsgate’s attack on Icahn — who owns stakes in a wide variety of companies — portrayed the billionaire as a meddler with no showbiz experience.
“The Lionsgate board of directors strongly believes that the unsolicited partial offer by the Icahn Group is inadequate from a financial point of view and doesn’t reflect the full value of Lionsgate shares,” said Lionsgate co-chairman and CEO Jon Feltheimer. “We are confident we can better serve our shareholders by continuing to execute our strategic business plan, and the acquisition of effective control by the Icahn Group would significantly jeopardize that plan.”
Lionsgate also asserted that if Icahn’s offer is successful, he would have effective “veto” power over transactions and could cause a default of Lionsgate’s credit line. “To the knowledge of Lionsgate, the Icahn Group has limited experience in operating a business in Lionsgate’s industry,” the company also said.
Icahn has also recently proposed that a rep of his join the board and sit on two new committees, one to reduce overhead spending and the other to evaluate spending on production. Additionally, Icahn said he wants equal status with Mark Rachesky, a former Icahn associate who owns nearly 20% of Lionsgate and sits on the board’s strategic committee.
Icahn spent several months last year threatening a proxy fight but backed away. At one point, he made an offer to acquire $325 million of Lionsgate debt but debtholders showed virtually no interest.
The company — home to “Precious,” “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. That was an improvement over a loss of nearly $98 million in the same period a year ago.