People who follow box office results closely won’t be surprised, but Lionsgate made it official today: Conan the Barbarian, Warrior and Abduction were such stiffs that the company says in an SEC filing it expects to announce that it lost somewhere between $40M-$50M in cash flow for the current quarter. Lionsgate made the unusual forecast in a prospectus to sell 19.2M shares, which stems from its agreement to help billionaire Carl Icahn unload most of his holdings in the company. The arrangement ended Icahn’s effort to take control. Vice Chairman Michael Burns is meeting with investors who might want to buy the shares. Lionsgate stock was unchanged in mid-day trading.
Lionsgate CEO Jon Feltheimer’s $7.9M Compensation Package For FY 2011 Up 116.8% Thanks To Carl Icahn
Billionaire Carl Icahn did a big favor for Lionsgate execs when he accumulated more than 33% of the stock in June 2010. That triggered change-in-control clauses in executives’ contracts, accelerating their stock payments for the fiscal year that ended this past March. An SEC filing out today shows that Feltheimer received $1.2M in salary and a $1.9M bonus — but nearly $4.8M in stock, up from $412,800 the previous year. The company also paid for personal expenses including $23,882 for club membership dues. Feltheimer’s bonus was down $50,000 in a year when Lionsgate shares increased less than 1%. The filing says that there are ”no specific financial performance targets or other objective performance criteria” for executives’ bonus awards; they’re based on ”a subjective determination” about how well they did. But Feltheimer was by far the highest-paid exec at Lionsgate: He made 250% more than the runner up, General Counsel Wayne Levin, with $3.2M. Feltheimer accounted for 46% of the total amount that went to the company’s top five execs who also included Vice Chairman Michael Burns ($2.7M), Co-COO Joseph Drake ($2M), and CFO James Keegan ($1.5M).
SANTA MONICA, Calif. and VANCOUVER, B.C. — December 16, 2010 — Lionsgate announced today that IVS Associates, Inc., the independent Inspector of Elections, has released its preliminary report for Lionsgate’s 2010 Annual General Meeting of Shareholders held on December 14, 2010.
Based on the preliminary tabulation by IVS Associates, Lionsgate shareholders have elected to the Lionsgate Board of Directors all twelve of the Company’s director nominees by a clear and convincing margin: Norman Bacal, Michael Burns, Arthur Evrensel, Jon Feltheimer, Frank Giustra, Morley Koffman, Harald Ludwig, G. Scott Paterson, Mark H. Rachesky, Daryl Simm, Hardwick Simmons and
Lionsgate issued the following statement:
“These results are a clear indication that Lionsgate shareholders understand our vision for Lionsgate and the tremendous potential for continued value creation under this Board and management team.
With the right leadership in place, Lionsgate is focused on continuing to build on the momentum over the last year, in which we achieved record results across our business. We thank our shareholders for their strong support throughout this process and we look forward to continuing to execute on our strategy for the benefit of all shareholders.”
With 93.92% of the total eligible shares voted, the results as a percentage of shares voted on directors are as follows:
Prior to the closing of the polls at the Annual General Meeting, all proxy cards received by the Company and the Icahn Group were turned
Not surprisingly, Lionsgate is trumpeting the fact that Carl Icahn has been dealt another court loss. The New York State Supreme Court just ruled against Icahn’s injunction to unwind Lionsgate’s July 20th deleveraging manuever that had the effect of diluting Icahn’s stake in Lionsgate from around 37% to around 32.8% and increasing studio board member Marc Rachesky’s stake from around 19% to around 29%. Icahn also lost his attempt to stop Rachesky from voting his shares in the Lionsgate vs Icahn proxy fight with the showdown set for the shareholders meeting on December 14th. Said the court: “It seems to me that the essence of a fight for control of a public company is which faction can win the hearts and proxies of the shareholders. Although the percentage of shares owned by a faction is a starting point to win this battle, persuasion is the ultimate vehicle for success.”
The Carl Icahn vs Lionsgate proxy war heated up overnight. That’s because two major proxy advisory firms counseled shareholders to support the entire or majority of Icahn’s dissident slate of directors for the embattled TV/film studio. A Lionsgate insider acknowledged to me that the recommendations were a “mixed bag” for the company. But Icahn trumpeted the news in advance of the December 14th shareholders meeting in Los Angeles.
The proxy advisory firm Egan-Jones, which provides independent voting recommendations, stated: “We feel that is imperative that the Dissidents be heavily represented on the Board … and that voting the dissidents’ ballot is in the best interest of the Company and its shareholders.” Icahn, naturally, was pleased. “The actions of Lionsgate’s Board speak for themselves as does the company’s and its stock’s performance,” he said in a statement.
Another major shareholder advisory firm Institutional Shareholder Services recommended to shareholders they approve 3 of Icahn’s five nominated board members: film executive Jay Firestone, lawyer Daniel A. Ninivaggi, and former Bertelsmann entertainment executive Michael Dornemann. However, ISS nixed ex-Overture boss Chris McGurk and former Princeton president Harold Shapiro.
Icahn himself issued a statement saying he was pleased by the recommendations, noting: “$100 invested in Lions Gate stock five years ago would be worth $56 today. If you had put that same $100 into an NYSE composite index, it would have been worth $117. If you had put it in my hedge fund, it would be worth $145. If you put it under your mattress, you at least would …
UPDATE: The destabilization of Lionsgate continues. Carl Icahn today took to the Internet and started a website slamming Lionsgate’s board in hopes of replacing 5 of the TV/film studio’s directors with his own rival slate. He also issued an “open letter” to shareholders pointing them there and to its 3 reports: 1) “Why change is needed at Lions Gate” (“Through the years I have seen many transgressions of corporate governance but they all pale in comparison to what has taken place during a week in mid-July 2010 at Lions Gate.”), 2) a report produced by Salem Partners investment bank about the value of Lions Gate’s film library (“and about cash flows or — better said — the lack thereof”; and 3) a report comparing Icahn’s nominees with the current directors of Lionsgate. It’s the latest maneuvering by the corporate activist/raider to convince shareholders to vote their “gold” cards for the scheduled December 14th shareholders meeting in Los Angeles. Lionsgate management wants shareholders to vote their “white” cards.
Usually, a proxy fight like this takes months of preparation and involves contacting every shareholder. But this is being done with virtually no time and little expense by Icahn, who owns 33% of Lionsgate. Icahn’s website focuses, in part, on “Which Slate is Better Qualified?” when the truth lies somewhere in-between. In fact, Icahn’s 5 candidates either don’t have showbiz experience or else were fired from their entertainment jobs. Meanwhile, Lionsgate is whispering to Hollywood that Frank Biondi, Jonathan Dolgen, Strauss Zelnick, and Jules …
UPDATE: Lionsgate has just issued a reaction (see below). It’s now officially a fight between white (LG’s) and gold (Icahn’s) proxy cards.
Carl Icahn today assembled his slate of 5 board members hoping to unseat Lionsgate’s current 5 board of directors – including the film/TV studio’s Vice Chairman Michael Burns — at the scheduled December 14th shareholders meeting in Los Angeles. (All those dinners where Burns attempted a rapprochement with Icahn obviously came to nothing.) It’s now confirmed that, as I previously reported, Icahn’s slate includes Chris McGurk, 53, the former MGM President and COO and Vice Chairman and Overture Films CEO, as well as filmmaker Jay Firestone, 54, a one-time vice chairman of Alliance Communications in Canada and founder of Fireworks Entertainment who is now head of Toronto-based Prodigy Pictures. Today Icahn revealed that also on Icahn’s list are: Dr. Michael Dornemann, 65, the former CEO of Bertelsmann Entertainment and an entertainment and marketing executive with more than 30 years of management consulting, corporate development, strategic advisory and media experience who is now on the board of Columbia Music; Daniel Ninivaggi, 46, who is President of Icahn Enterprises; and Dr. Harold Shapiro, 75, Princeton university’s 18th president until 2001 and currently a professor of economics and public affairs there. Icahn wants them to replace Michael Burns, Harald Ludwig, G. Scott Paterson, Mark H. Rachesky, and Hardwick Simmons on the current Lionsgate board. Today’s Icahn proxy statement says:
“Given that Carl Icahn and the other Participants believe that the Company has not yet been able to, among other things,
BREAKING: In the latest development in Carl Icahn’s attempt to take over Lionsgate and merge its assets with MGM, a Supreme Court judge in British Columbia has dismissed Icahn’s lawsuit to thwart a Lionsgate de-leveraging move on July 20 that took $100 million in debt off the books and converted it into equity, which was bought by shareholder John Kornitzer, who is loyal to the existing Lionsgate brass. In a separate third party transaction, Kornitzer sold those shares to Mark Rachesky, who is on the Lionsgate board and firmly behind current management. That move pushed Icahn’s 38% stake in the company back to 33.5%, and increase Rachesky’s stake from 19% to 29%. Icahn can still gain more shares, as his $7.50 per share tender offer has been extended until November 12. But his 33.5% stake isn’t enough to win a proxy fight.
Lionsgate has recommended to shareholders that they spurn Carl Icahn’s latest offer to pay $7.50 for outstanding shares. The company just filed its Schedule 14D-9 Report. The report described a September 7 meeting of the board of directors, which unanimously rejected the offer and voted to recommend that shareholders do the same. The reasons included strings that Icahn attached to the offer, but also that Lionsgate management feels confident about recent momentum it has built with recent releases The Expendables and The Last Exorcism, both of which performed well in late August. The company also cited the surprising resilience of the film Kick-Ass, which has grossed $50 million domestic and $100 million worldwide and which just topped the DVD sales charts. Lionsgate also cited a record 26 Emmy nominations, including wins for Mad Men and Nurse Jackie, as reasons to feel bullish on the TV side. Not in the report was the week long meetings held by Lionsgate brass with directors for The Hunger Games, the first in a series of three Suzanne Collins novels that have the potential to be a game-changer for the indie, much the way that Twilight was for Summit Entertainment.
Icahn recently raised his share offer to its highest, after a starting bid of $6.50, which climbed to $7. The stock closed slightly down, at $7.14 per share.
No surprise. Lionsgate announced today its Board of Directors who were present voted unanimously reject Carl Icahn’s $6.50 a share tender offer for all outstanding common stock in the film/TV studio.
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.
So now Carl Icahn owns only 33.5% of the film and TV studio, and not the 37.9% he had as of yesterday. Nasty, nasty, nasty. Though it is interesting to see these two camps whack at each other as Icahn tries for a hostile takeover. Here’s how Lionsgate described what it did today:
SANTA MONICA, Calif., and VANCOUVER, British Columbia, July 20, 2010 – Lions Gate Entertainment Corp. (NYSE: LGF) (the “Company”) announced that today it had completed a deleveraging transaction in which approximately $100 million of its senior subordinated notes were converted into common shares at an effective conversion price of $6.20 per share. The conversion price represented a 2.8% premium to Monday’s closing price of the Company’s common stock.
The transaction is a key part of the Company’s previously announced plan to reduce its total debt, as well as its nearer term maturities.
The transaction was effected by the Company’s wholly owned subsidiary Lions Gate Entertainment Inc. (“LGEI”) pursuant to the exchange of $36,009,000 in aggregate principal amount of its 3.625% Convertible Senior Subordinated Notes due 2025 and $63,709,000 in aggregate principal amount of 2.9375% Convertible Senior Subordinated Notes due 2024 in a private transaction. The notes were exchanged for new notes which were identical to the old notes but had an extended maturity date and extended put rights by two years and were immediately convertible at an initial
BREAKING NEWS! … UPDATE: Today, Lionsgate Entertainment filed Form 8-K paperwork with the SEC that it has entered into a “Material Definitive Agreement” with Carl Icahn agreeing ”to work together on certain acquisition opportunities beginning on July 9, 2010 and ending on July 19, 2010″. Icahn has been leading a hostile takeover of the movie/TV studio and now owns 37.9% of Lionsgate which he’d like to buy for his son Brett to run. But Lionsgate is moving to cap Icahn’s shares at 38%. So today’s ceasefire announcement was surprising. However, Lionsgate insiders tell us that this is, at best, a temporary halt to the long battle for the studio. Lionsgate recently stepped up merger talks with MGM. Here is the letter just filed with the SEC:
Mr. Carl C. Icahn
Each of Lions Gate Entertainment Corp. and its subsidiaries (“Lions Gate”) and Carl C. Icahn and his affiliates (“Icahn”) hereby agree that, beginning today and ending at midnight, New York City time, on July 19, 2010 (the “End Date”), Icahn and Lions Gate will work together on certain acquisition
Lions Gate hereby agrees that, beginning today and ending on the End Date, it will not: (i) issue, agree to issue, or authorize or propose the issuance of, any securities to, or enter into any agreement, contract or understanding outside the ordinary course of business with, any member of its board of
directors or their affiliates; (ii) engage in active negotiations for
The studio sees the glass as half full, putting out a statement that “66% of Lionsgate stockholders support management and rejected Carl Icahn’s $7-a-share tender offer. But after that offer expired last night, Carl Icahn now owns 33.9% of the Santa Monica movie and television studio which he’s been attempting to control for his son Brett through a hostile takeover. I’ve already reported that Lionsgate Vice Chairman Michael Burns flew to NYC last week to break bread with Icahn and discuss, among many topics, Lionsgate’s merger talks with MGM. But the rehetoric from both sides remains nasty. So can a negotiated settlement be reached before Icahn starts that promised expensive proxy fight prior to the studio’s annual shareolders meeting this September? the next news may well be Icahn’s announcement of a full slate of directors to replace Lionsgate’s board. here’s Lionsgate’s statement today:
At the completion of the Icahn Group’s offer, holders of over 66% of Lionsgate shares have rejected the Icahn Group’s offer, with only 2.1% of the outstanding shares being tendered into the offer during the subsequent offering period.
We want to take this opportunity to thank our shareholders. Lionsgate’s shareholders have repeatedly confirmed their support for the Board and management’s strategy to grow shareholder value by continuously rejecting the Icahn Group’s financially inadequate offer.
Our focus continues to be running the business to build value for all of our shareholders. As reflected in our strong fiscal 2010 results,
EXCLUSIVE: Reliable sources tells me that Lionsgate vice chairman Michael Burns flew to NYC on Wednesday night to have dinner with Carl Icahn “to see if they could work together and avert a hostile takeover of the studio”. This is a very big deal because in recent months and weeks the two men have been sparring very publicly on CNBC. Or Icahn and Lionsgate management have been sending nasty letters to shareholders and even nastier news releases to the media about each other. I understand that Burns explained why Lionsgate is having merger talks with MGM. That may be the reason why Carl was not completely dismissive of the idea Friday – but not why he still slammed management for distracting from the studio’s problems. Remember, a proxy fight like the one Icahn has pledged to wage is a very expensive proposition. And now that Lionsgate stock has joined the Russell 2000 index and jumped past Carl’s $7-a-share tender offer, Icahn may have to offer at least $7.50 to control more than 32% of the studio. Thus making his hostile takeover still more pricey.