Mike Fleming

UPDATED: What came out of the 10-day cease fire between Carl Icahn and Lionsgate management? An offer by Icahn to buy the company for $6.50 a share. Considering that Icahn acquired over 30% of the company by offering $7 per share — Lionsgate management called that sum inadequate and urged shareholders to reject it — it seems unlikely this will lead to a deal.

Icahn’s firm said today there were no immediate opportunities that justified extending the “standstill period,” though it said discussions about a potential acquisition may continue in the future. Icahn’s side also reiterated that it intends to replace all or most of Lionsgate’s board of directors. The firm said recent actions taken by the company, like its adoption of a second poison pill measure after a previous one was struck down by Canadian regulators, convinced the firm that “it is extremely unlikely that the current management and board of directors of Lionsgate will allow shareholders of Lionsgate to make their own determination on the future path of the company, including decisions to make a major acquisition.”

Here’s the release just issued by Lionsgate and Icahn’s statement:

SANTA MONICA, CA, and VANCOUVER, BC, July 20, 2010 — Lionsgate today announced that it has received an unsolicited tender offer from Carl Icahn to acquire up to all of the common shares of Lionsgate for US$6.50 per share in cash. The offer is scheduled to expire at 8:00 p.m., New York City time, on August 25, 2010, unless extended or withdrawn.

Consistent with its fiduciary duties and in consultation with its financial and legal advisors, Lionsgate’s Board of Directors will review Mr. Icahn’s proposal and will make its recommendation to shareholders promptly. The Board of Directors’ recommendation will be included in a Solicitation/Recommendation Statement filing on Schedule 14D-9. Lionsgate noted that there is no need for shareholders to take any action at this time.

Icahn’s released this today:

Carl C. Icahn announced today that certain of his affiliated entities (the “Icahn Group”), which collectively hold approximately 37.9% of Lions Gate Entertainment Corp.’s outstanding common shares, have commenced a tender offer (the “Offer”) for UP TO ALL of the outstanding common shares of Lions Gate. The purchase price in the Offer is USD $6.50 per share in cash. Shareholders will be entitled to elect to receive payment in Canadian dollars.

Among other customary conditions, the Offer is conditioned on Lions Gate not entering into any material transaction outside of the ordinary course of business (including any acquisition of assets over $100 million and any issuance of securities other than upon the exercise of currently outstanding options) and all rights issued or issuable under the poison pill adopted by Lions Gate’s board of directors on July 1, 2010 being cease-traded or otherwise eliminated. The Offer is not subject to financing.
Following the expiration of the subsequent offering period with respect to the Icahn Group’s previous tender offer, representatives of the Icahn Group and Lions Gate entered into discussions concerning certain corporate governance matters (including the possibility of adding persons designated by the Icahn Group to Lions Gate’s board of directors) and certain acquisition possibilities. These discussions resulted in the parties entering into a 10-day “standstill” agreement on July 9, 2010, which provided, among other things, that the Icahn Group and Lions Gate would work together on certain acquisition opportunities and that Lions Gate would: (i) not set a record date with respect to the 2010 annual meeting of shareholders or any special meeting of shareholders before September 2, 2010 and (ii) not take certain other actions adverse to the interests of the Icahn Group. The 10-day standstill period terminated at midnight, New York time, on July 19, 2010. While certain discussions regarding acquisition opportunities might continue in the future, the Icahn Group determined that there were no immediate opportunities that would merit extension of the 10-day standstill period.

Lions Gate’s latest actions (including the recent implementation of a second poison pill after the first poison pill was struck down by Canadian securities regulators) convince the Icahn Group that it is extremely unlikely that the current management and board of directors of Lions Gate will allow shareholders of Lions Gate to make their own determination on the future path of the company, including decisions to make a major acquisition. The Icahn Group therefore intends to seek to replace all or the lion’s share of Lions Gate’s board of directors with the Icahn Group’s nominees.
Lions Gate has stated that the acquisition by any person or group of more than 50% of its common shares could result in the acceleration of more than $500 million of its indebtedness if lenders were to declare events of default as a result of this “change in control”. If such acceleration occurs (which will not be a condition allowing the Icahn Group to withdraw the Offer), the Icahn Group believes that Lions Gate will need to immediately secure a replacement source of funding in order to continue to operate its business and avoid bankruptcy. The Icahn Group believes this is a problem of Lions Gate’s own making – had the board of directors not agreed to these controversial “poison put” provisions, the company would not now be facing this very difficult situation. As previously stated, the Icahn Group intends to hold the board responsible for any costs and damages the company might incur from having to obtain emergency financing to alleviate this situation.
The Icahn Group reserves the right to engage in discussions with third parties regarding possible future acquisitions. Lions Gate may be part of these discussions. However, there can be no assurance that these discussions will take place.