Image Entertainment Inc. rejected a revised bid from Lions Gate Entertainment Inc. and enacted a "poison pill" to discourage a possible hostile takeover, sending its stock skidding nearly 11 percent.
Late Monday, the Chatsworth-based DVD and CD distributor said in a statement that the offer from Lions Gate was "substantially below" the price it would accept based on a review by a special committee appointed by the board to evaluate the proposal.
Lions Gate, which owns 19 percent of Image shares, revised its previous proposal, offering $4 per share in an all-cash bid.
The market reacted negatively to the news of Image's rejection. Shares of Image Entertainment fell 11.1 percent to settle at $3.68 on Tuesday.
Image said it has put in place a stockholder's rights plan that allows shareholders the right to acquire one unit of a share of preferred stock at $12.42 a share, which would be exercisable only if a company acquired 30 percent or more of Image shares. The move would be expected to drive up the cost of any acquisition.
John Feltheimer, Lions Gate's co-chairman and chief executive, had sent a letter to Ira Epstein, Image Entertainment's chairman, stating that the all-cash offer assumed the deal would be negotiated "on a friendly basis" and that Image "does not implement any change-in-control protections."
In a regulatory filing with the Securities and Exchange Commission on Tuesday, Santa Monica-based Lions Gate called its own offer "full and fair," and said it would consider offering a $3.5 million termination fee.
Lions Gate, which released its latest horror film "Saw II" last weekend to big success, had offered to buy Image in September for up to $93 million in stock.
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