Every Icahn move has deep reverberations inside the film/television studio whose management is increasingly paranoid about how their actions will be viewed by him. What a destabilizing situation. Now Carl Icahn’s hostile takeover attempt intensifies with his $7.50 a share unsolicited tender offer this morning. It expires October 22nd. Icahn said his new offer will only be valid if the extra shares that the company recently issued to Lionsgate director Mark Rachesky (who used to be Icahn’s investment adviser) are rescinded or converted into nonvoting stock. The film/TV mini-major, in a defensive move against Icahn, did a debt-for-equity swap in July to dilute his stake in the company. It issued 16.2 million new common shares to Rachesky, boosting his stake to 28.9%, while diluting Icahn’s stake to 33.5% from 37.9%.
Icahn has asked the Supreme Court of British Columbia to reverse the swap. Lionsgate told me just now that its annual shareholders meeting, usually scheduled for sometime in September, has been postponed until after October 12th. “The British Columbia Supreme Court, which is hearing Icahn’s litigation, asked us to delay the record date for the Annual Shareholders Meeting until after their October 12 hearing,” a source told me.
Here is Lionsgate’s response to Icahn’s new tender offer:
SANTA MONICA, Calif. and VANCOUVER, August 31, 2010 — Lionsgate today announced that it has received a revised unsolicited tender offer from Carl Icahn and certain of his affiliated entities (the “Icahn Group”) to acquire up to all of Lionsgate’s
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Earnings season has produced better-than-expected results at the major studios and networks with only Disney left to report tomorrow. (Watch for Deadline’s full summary.) But Lionsgate just reported bad news when Carl Icahn is breathing down its neck for that hostile takeover attempt. The mini-major today reported revenue of $326.6 million and adjusted EBITDA of negative $13.7 million for the first quarter of fiscal year 2011 compared to positive $53.4 million for the prior year first quarter. Net loss was $64.1 million in the quarter compared to net income of $36.3 million in the prior year’s first quarter.
The loss was attributable primarily to an increase of $71.2 million in theatrical marketing costs as the Company distributed three wide releases in the quarter compared to one wide release in the prior year’s first quarter. Revenue declined 14% compared to the prior year’s first quarter due primarily to the deconsolidation of TV Guide Network revenue, the timing of television deliveries, the decline in Mandate Pictures revenue compared to a record quarter last year, as well as a decline in home entertainment revenue attributable to the smaller theatrical slate in fiscal 2010. Basic net loss per common share for the quarter was $0.54 compared to basic net income of $0.31 in the prior year’s first quarter.
“Our first quarter was affected by marketing costs for our three wide releases, timing of television deliveries and the underperformance of our theatrical release KILLERS,” said Lionsgate Co-Chairman and Chief Executive … Read More »
Another nasty day in the Carl Icahn vs Lionsgate battle. This time, Icahn has made good on his threat to go to court to overturn the film/TV studio’s recent “scorched earth tactic” that diluted his stock holdings He’s referring to last week’s debt-for-equity swap involving major shareholders Mark Rachesky and John Kornitzer. The lawsuit was filed today in the New York State Supreme Court against Lionsgate, its board of directors, Rachesky, Kornitzer Capital Management and its principal John Kornitzer. Icahn wants an injunction to reverse the deal that bought and converted $100 million in senior notes to reduce Icahn’s stake in Lionsgate from 37.3% to 33.5%. “If allowed to stand, this scheme will insulate the directors and management from having to face a fair election at the upcoming annual meeting of Lionsgate’s shareholders,” Icahn said.
He also filed a Canadian petition in the Supreme Court of British Columbia about the manuever on Friday, while the British Columbia Securities Commission has scheduled a hearing about it on July 28th.
It was Lionsgate’s lastest attempt to thwart his hostile takeover of the mini-major and give it to his son Brett to run. Still pending is Icahn’s latest $6.50 a share tender offer for outstanding shares of the company, and his promise to wage a proxy fight over control of Lionsgate’s board at the September annual meeting.