Icahn Ups AnteWith Lionsgate Bid

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.