Lions Gate Entertainment Corp. on Friday said it rejected Carl Icahn's unsolicited bid to increase his stake in the Santa Monica independent film studio. Its board also adopted a “poison pill” shareholders rights plan to discourage further efforts by the billionaire activist investor.
Icahn already owns 18.9 percent of outstanding shares and last month offered to buy another 13.2 million shares at $6 per share. That would increase his stake to about 30 percent and make him the company’s largest single shareholder.
The company, which has corporate office in Vancouver, B.C., called Ichan’s offer "financially inadequate and coercive and is not in the best interests of Lions Gate and its shareholders and other stakeholders."
Lions Gate “is a strong and diversified company with a focused strategy that we expect to generate far greater value for shareholders,” said Chief Executive Officer Jon Feltheimer in a statement. “We are confident we can better serve our shareholders by continuing to execute our strategic business plan, and the acquisition of effective control by the Icahn Group would significantly jeopardize that plan."
Lions Gate also warned if Icahn acquired a 30 percent stake, that could trigger a default in its credit facility. Icahn in the past has countered that obtaining a waiver or prepayment of the debt could avoid such problems.
Lions Gate, which produces and distributes films and TV shows, and owns the TV Guide cable channel, also has rebuffed the billionaire activist investor’s previous overtures. Icahn has been adding to his position since late 2008, but earlier efforts to obtain enough shares to gain a seat on Lions Gate’s board have fallen short.
In the Thursday meeting, the board of directors adopted a shareholders rights plan that be triggered once any person or group trying to acquire beneficial ownership of 20 percent or more of the company's outstanding voting interests, including derivatives, under certain circumstances, according to a separate Securities and Exchange Commission filing. The plan would effectively create additional shares and dilute the stock.
Under the adopted plan, the penalties would kick in unless the acquiring entity intended to buy more than 50 percent of outstanding shares that it did not already own. In Ichan’s case, that appears to mean that he would have to be willing to acquire roughly 70 percent of Lions Gate stock.
Ichan has not yet released a response to the board’s latest action.
Shares were up 8 cents, or 1.4 percent, in midday trading on the New York Stock Exchange.
For reprint and licensing requests for this article, CLICK HERE.