Icahn Begins Hostile Offer for Lions Gate After Snub (Update5)
March 19, 2010, 4:07 PM EDT(Updates with closing stock price.)
By Brett Pulley and Sarah Rabil
March 19 (Bloomberg) -- Carl Icahn began a $574 million hostile offer to buy Lions Gate Entertainment Corp. after the film studio rejected his efforts to increase his stake to as much as 30 percent.
Icahn is offering $6 a share, unchanged from his partial tender offer for 13.2 million shares, according to an e-mailed statement today. He extended the deadline for tendering to April 30. As of Feb. 1, the company had 117.8 million shares outstanding, according to Bloomberg data.
The move coincides with today’s bidding deadline for Metro- Goldwyn-Mayer Inc., which has fallen behind on interest payments. Lions Gate, run from Santa Monica, California, and based in Vancouver, is among the suitors, people close to the situation said last month. Icahn, Lions Gate’s second-largest shareholder with about 19 percent, opposes the acquisition.
“If he was really interested in Lions Gate he would offer $12 and take the whole thing,” said John Kornitzer, founder of Kornitzer Capital Management in Shawnee Mission, Kansas, which held 1.61 million shares as of Dec. 31. “He’s trying to upset management and get them not focused on the MGM deal.”
Lions Gate, maker of the “Saw” horror films, rose 6 cents to $6.03 at 4:02 p.m. in New York Stock Exchange composite trading, suggesting some investors may expect a higher bid. The stock has gained 3.8 percent this year.
The studio said on March 12 the billionaire’s partial offer wasn’t in the best interests of investors. The company adopted a shareholder rights plan making it more costly for an investor holding a 20 percent stake to buy additional stock.
Countering Criticism
“These tactics serve only to strip shareholders of an opportunity and entrench management,” Icahn said in the statement. “Lions Gate previously criticized our tender offer for being partial. That is no longer the case.”
Icahn said he plans a legal challenge to the poison pill.
Peter Wilkes, a spokesman for Lions Gate, said by telephone that the company previously determined that Icahn’s $6-a-share offer was inadequate.
“Icahn’s original offer was an attempt to control the company with a majority stake and not a control premium,” Wilkes said. “Now he’s going for full control without a control premium.”
David Joyce, an analyst at Miller Tabak & Co. in New York, said he didn’t know why Icahn would offer $6 a share after Lions Gate had already rejected the same amount.
“I don’t think he’s going to be successful to get people to tender,” Joyce said in a telephone interview.
As of Feb. 16, Icahn, 74, owned 22.1 million Lions Gate shares, according to Bloomberg data. Mark Rachesky’s MHR Fund Management is the largest holder with 19.7 percent. Rachesky is a former aide to Icahn and is on the board of Lions Gate.
No Acquisitions
Icahn’s earlier offer contained a provision seeking to block Lions Gate from undertaking acquisitions of more than $100 million, according to a statement from the investor.
“Lions Gate’s management should not further leverage up the company to purchase a film library without allowing shareholders the opportunity to decide whether increasing exposure to this segment is wise,” he said today.
Binding, second-round bids are due today for MGM, which has been unable to make interest payments on $3.7 billion of debt. Time Warner Inc. and billionaire Len Blavatnik’s Access Industries are also among the possible buyers, the people said.
Los Angeles-based MGM owns a film library with 4,100 titles and distributes the James Bond films. Lions Gate has also expressed an interest in Walt Disney Co.’s Miramax film unit.
--With assistance from Michael White in Los Angeles and Andrew Dunn in New York. Editors: Andrea Snyder, Cécile Daurat
To contact the reporter on this story: Brett Pulley in New York at bpulley@bloomberg.net; Sarah Rabil in New York at srabil@bloomberg.net
To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net
