Icahn Ups Ante With Lionsgate Bid

By Mike Farrell -- Multichannel News, 3/22/2010 9:55:05 AM

A week after being rebuffed by Lions Gate Entertainment’s board of directors in his partial tender offer for about 13 million shares of the studio’s stock, former corporate raider Carl Icahn has raised the ante, launching a bid for all of the company’s shares for a total of $574 million.

The move comes after the board of Lions Gate — parent of the Lionsgate studio — rejected Icahn’s partial tender offer for 13.2 million shares, which would have made him the largest individual shareholder in the company, as too low. In a statement on Friday, March 12, Lions Gate accused Icahn of trying to wrest control of the studio, which also owns the TV Guide Channel, is a partner in the Epix premium channel and produces hit cable shows like Mad Men and Weeds, at a fire sale price. The Icahn offer for the 13.2 million shares amounted to about $79 million.

“Lions Gate previously criticized our tender offer for being partial,” Icahn, who already controls 19% of Lions Gate shares, said in a statement. “That is no longer the case.”

Icahn said he would not increase his $6-per-share cash offer for the stock because it already represents a premium of about 23% to its trading price of $4.85 each on Feb. 4, the last trading date before Icahn resumed purchasing Lions Gate stock. Lions Gate shares were trading at $6.03 per share (up 3 cents each or 1%) in early trading March 19.

Lions Gate has about 117.8 million shares outstanding. Subtracting the 22.1 million shares already owned by Icahn makes the offer for 95.7 million shares worth $574.2 million.

The new bid is predicated on Icahn securing 50.1% control of Lions Gate and the dismantling of a poison pill the company recently adopted.

In a research report, Cowen & Co. media analyst Doug Creutz wrote that Icahn’s main motivation for the offer appears to be to block the studio from bidding for film library assets (Lionsgate is thought to be interested in both Metro-Goldwyn-Mayer and Miramax studios). But although Icahn has raised the ante for Lions Gate, Creutz added, the offer is still too low. He wrote that even a conservative sum of the partial valuation values Lions Gate at 20% above its current market price.

Icahn has been a vocal critic of the studio and tried to gain control of a large block of Lions Gate stock last year. Last March, after failing to successfully negotiate a seat on Lions Gate’s board of directors, Icahn launched a tender offer for the holding company’s convertible debt (which would have given him a 20% interest in the company), only to abandon the effort in May after a fraction of debt holders took advantage of his offer.