Icahn Renews Lions Gate Bid

By Mike Farrell -- Multichannel News, 7/26/2010 12:01:00 AM

Activist investor Carl Icahn renewed his battle for control of Lions Gate Entertainment last week, rejuvenating his tender offer for the parent of the Lionsgate studio’s stock after a 10-day truce.

Icahn, who has been critical of Lions Gate management in the past, agreed to a 10-day moratorium on July 9, pledging not to make another tender offer for the media company until after his earlier $7-per-share proposal expired on July 19. During that moratorium, Icahn and Lions Gate agreed to work together on “certain acquisition opportunities.”

While some observers thought that to be code for Metro-Goldwyn-Mayer, the movie studio that Lions Gate was said to be among the bidders for (and whose purchase Icahn opposed), no deals came to fruition. Instead, Icahn launched another tender offer for the remainder of Lions Gate stock, this time for $6.50 per share, a 7% discount to his prior tender offer. The latest offer expires on Aug. 25.

Lions Gate, which produces such cable hits as Mad Men, Weeds and owns the TV Guide Channel, said in a statement that it would review Icahn’s latest offer and make a recommendation to shareholders “promptly.” It should be noted that Lions Gate had recommended that shareholders reject Icahn’s last tender offer, which was for more money.

About 22.7 million shares were tendered in the earlier offer, boosting Icahn’s holdings in the company from about 19% (22.1 million shares) of outstanding stock to 37.9% (44..8 million shares). But that was only to last for a day. On July 20, Lions Gate converted $100 million in debt which effectively reduced Icahn’s stake in the company to 33.5%.

Lions Gate converted about $100 million of its senior subordinated notes into common stock at about $6.20 per share, a 2% premium to the July 19 closing price of Lions Gate’s common stock. The deal, which was described by the company as a deleveraging transaction, also diluted existing shareholders, including Icahn.

Icahn has been an outspoken critic of Lions Gate management and has called for the ouster of its entire board of directors if he were to gain control of the company.