The new plan “is intended to protect Netflix and its stockholders” from a takeover effort that the board believes would not “enable all stockholders to realize the long-term value of their investment in Netflix,” the company says this morning. But it adds that the effort would not interfere with a business deal that’s approved by the board. The terms appear to be specifically designed to block corporate raider Carl Icahn, who disclosed last week that he owns stock and options equal to 9.98% of Netflix. It would essentially enable the company to flood the market with shares to dilute any additional purchases he makes. Specifically, Netflix would give those owning stock as of November 2 a collection of rights equal to the number of shares they already own. Each right would give the owner the ability to buy one one-thousandth of a share of a new series of preferred stock at an exercise price of $350 per right. These new rights would become exercisable once an individual (say, Icahn) owns at least 10%, or an institutional investor acquires 20%, of Netflix’s stock without the board’s approval. The rights will expire on November 2, 2015 if they haven’t been redeemed.
Lots of Netflix investors seem to believe that the corporate raider has enough ideas and juice to revive the video rental company, which is struggling to secure its place in the media ecosystem. Shares only retreated 3% since Wednesday, when they popped 13.8% on the startling news that Icahn bought stock and call options that could give him 9.98% of the company. That resulted in widespread speculation that the legendary crusader for shareholder value has a plan to force Netflix to take a new direction following nearly a year and a half period during which Netflix lost 74% of its market value.
Well, if he does, then it will be interesting to see what it is — and how he might prevail if he crosses swords with CEO Reed Hastings. Icahn has fewer options than people think.
Potent anti-takeover provisions in Netflix’s by-laws would make it difficult to wage a hostile effort to take over the board. The company’s staggered elections mean that only a third of the directors are replaced each year. What’s more, Netflix doesn’t allow shareholders to call a special election to pick new directors. If Icahn continues to buy stock, the company can exercise what’s known as a poison pill — a provision that gives the board the right to flood the market with up to 10M preferred shares, diluting the value of his holdings. Corporate law in Delaware, where Netflix is incorporated, also bars companies from combining with a holder of more than 15% of its stock unless the holder has had the shares for at least three years — unless the board approves the transaction.
Netflix shares skyrocketed — +20% at one point in mid-afternoon trading before closing +13.8% — after the billionaire corporate raider disclosed that he recently bought stock and call options that could give him control of 9.98% of the company. Carl Icahn says in an SEC filing that Netflix is “undervalued” and “may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the internet, mobile, and traditional industry.” Icahn also is “considering ways for [Netflix] to maximize shareholder value.” But he has “reached no conclusion” and “may in the future seek to have discussions” with the company. That’s a loud cannon shot across CEO Reed Hastings‘ bow: Icahn made his name as a so-called corporate raider, buying stock in companies that he considered undervalued and then angling either to take control or change the firm’s strategy to boost the share price.
If true, it puts Carl Icahn on the Hollywood sidelines after selling stakes in Blockbuster before it went into bankruptcy and most recently Lionsgate, in which he sold his 33% stake after he tried and failed to merge it with MGM. The latest move makes sense for MGM, which last week filed a draft IPO statement and hired JPMorgan Chase and Goldman Sachs to manage the offering. It suggests that MGM has come a long way from when it emerged from bankruptcy in 2010. An insider tells Deadline about the Icahn move, which separates MGM from what Bloomberg says is its largest shareholder: “It shows that MGM is very serious about their IPO. A public offering is hard to do when Icahn is in your stock, because he keeps investors sitting on the sidelines.” According to a confidential letter obtained by the LA Times, MGM is paying Icahn $33.50 for each of his 17.6 million shares, so his approximate 25% stake sells back to MGM for $590 million – though the paper did not know if that made him a profit. MGM could be ramping up for its IPO by year’s end as two of its major film properties hit the big screen: the James Bond pic Skyfall on November 9 and the first installment of Peter Jackson’s The Hobbit on December 14.
The billionaire activist investor would have been $345M richer if he had held on to his Lionsgate stock — which closed today at $14.22 per share — instead of selling the bulk of his holdings late last year for about $7 per share. At one point he owned 33% of Lionsgate. But he shrugged off his miscall in an interview this afternoon on CNBC. “You can’t win ‘em all,” he said. “I sent those guys an email congratulating them” following Lionsgate’s success this weekend with The Hunger Games. “You know, it’s very hard to pick stocks, but it’s impossible to pick the right movie. When it was $7 — unless Lionsgate had that big hit — there would be problems, I thought. Obviously we were wrong.” No need to feel sorry for Icahn. His portfolio appreciated 35% last year. “We are pretty proud of our performance,” he says. But if he had held on to Lionsgate, it would have been up 37%, he says. The stock has appreciated 70.9% since the end of 2011.
Lionsgate Vice Chairman Michael Burns had to disappoint analysts who wanted him to open up about the big question of the day for his company: What’s going on with its reported merger talks with Summit Entertainment? “I’m not going to talk about any specific deal,” he said at the UBS Annual Global Media and Communications Conference. He noted, though, that a consolidation of independent film and TV companies is “a natural thing to happen.” He assured the group that Lionsgate is only interested in deals that add to its value, and don’t require it to either issue stock or take on additional debt. “We’re looking to delever, not lever up,” he says.
With that out of the way, he spoke candidly about the company’s plans for next year where he says “you’ll see us steady state for the first time” cranking out about a dozen movies and about three new TV shows. He’s encouraged about a plan to develop a TV series for ABC based on The Lincoln Lawyer – and Charlie Sheen’s Anger Management. ”I’ve known Charlie a long, long time,” Burns said. “Our goal is to keep Charlie working, keep him healthy — and we have a great partner in FX.” Burns says that a series it’s developing for
Lionsgate has released its first trailer for The Hunger Games, the Gary Ross-directed adaptation of the first of a trilogy of Suzanne Collins novels. The film stars Jennifer Lawrence, Josh Hutcherson and Liam Hemsworth and will be released March 23. Coming off a bad quarter and surviving a takeover attempt by Carl Icahn, Lionsgate needs The Hunger Games to take it to the next level, the way that Twilight Saga did for Summit Entertainment. The Collins book series has been a bestselling phenomenon with a strong youth demographic, so the ingredients seem to be there.
Here’s still more evidence that Carl Icahn is getting out of Lionsgate’s hair. The studio’s stock price spiked after the market closed Wednesday when a big block of 3 million shares traded. I’m told the block was Icahn’s, and the sale now takes him down from 3.1% to just 1% ownership of the movie and TV company. The transaction followed Lionsgate’s recent truce with Icahn: it involved a secondary offering for 19.2M of his shares, which brought his control of the studio from 33% down to 3.1%. Today reduces that further still. Maybe now I can retire this photo, huh?
So much for last week’s breathless reports about how this secondary offering for 19.2M of Carl Icahn’s shares was put “on hold” due to a drop in Lionsgate’s stock price. The deal with Icahn requires Lionsgate to pay him $7 a share, which should then put an end to the billionaire’s effort to control the film and TV company. Lionsgate didn’t want to have to make up the difference if it couldn’t collect that much from this offering. That doesn’t seem to be a problem now; Lionsgate closed yesterday at $7.10.
OK, so how did Icahn fare in this Hollywood drama? Not well. He probably ends up with a slight profit on his Lionsgate stock, which cost him an average of $6.90 a share. But that likely was more than eaten up by the legal bills for his applications to the Securities Commission in British Columbia, the suits he lost in the Canadian province’s Supreme Court and Appeals Court, as well as cases at the New York Supreme Court and District Court. Here’s the announcement of the offering:
Has Lionsgate’s effort to sell 19.2M shares in the company owned by Carl Icahn been put “on hold,” as Reuters reported yesterday? The answer is: sort of, but not exactly. Yes, the company wanted to price the shares this week and hasn’t done so yet. Timing is important: Lionsgate is committed to pay Icahn $7 a share, and closed on Tuesday at $6.84. Still, the company has until October 18 to make the sale, and can price it almost at a moment’s notice. So Lionsgate is within the window to see if it can command a better price. That’s not a far-fetched idea. Its shares closed today at $7.02. If there’s no sale by the mid-October deadline, then Icahn simply hangs on to his shares — something that neither side seems to want.
Lionsgate said in a regulatory filing today that Mark Rachesky, the former Carl Icahn protege and the mini-major’s largest shareholder, has been appointed co-chairman of the board, a title he will share with current CEO Jon Feltheimer. The move was finalized on Tuesday, according to the SEC filing; Feltheimer was re-appointed as the other co-chair. Rachesky has 37.3% of Lionsgate shares, making him by far its largest investor. He replaces Harold Ludwig as co-chair, though Ludwig remains on the board. Rachesky was Icahn’s chief investment officer for about a decade but left to start his own fund. Last year, he was considered a key player in keeping Lionsgate out of Icahn’s hands, increasing his stake in the company as Icahn’s challenge to Lionsgate’s management grew. Lionsgate and Icahn settled their longtime dispute last month, ending the corporate raider’s hostile takeover attempt.
SANTA MONICA, CA, and VANCOUVER, BC, August 30, 2011 – Lionsgate (NYSE: LGF) (“the Company”), a leading diversified global entertainment company, announced today that Carl and Brett Icahn have reached an agreement with the Company under which the Icahns have agreed to sell up to 44,161,971 shares of Lionsgate common stock, representing substantially all of the Lionsgate shares currently owned by the Icahns. The parties also agreed to dismiss all outstanding litigation between them and release all claims that they may potentially have against each other.
BREAKING: In a move that ends a protracted hostile takeover attempt, Carl Icahn and Lionsgate have announced that Icahn and his son Brett will sell up to 44,161,971 shares of Lionsgate common stock, which is virtually the entire stake held by the family. Both Lionsgate and Icahn in turn have dropped the various litigation between them. Those shares will be sold for $7, which is below the $7.52 that the stock was worth at the market close today.
Through a series of tender offers that ranged from $6 per share to $7.50, Icahn accumulated a total of 33.2% control of Lionsgate, blasting the company’s management every step of the way as he tried to oust the company’s board. Those shares will fall into the hands of Lionsgate’s largest shareholders in a series of transactions that will take place over the next 35 business days. Right away, Lionsgate has bought 11,040,493 shares for $7 each. Another 11 million shares will be bought by one or more affiliates of MHR Fund Management LLC, which is controlled by Mark H. Rachesky, a Lionsgate director whose moves during the takeover battle helped management keep Icahn from accumulating enough shares to win a proxy battle.
The billionaire shareholder activist isn’t buying a lot — but it’s enough to keep company watchers wondering whether he might challenge Lionsgate’s management at the September 13th investor meeting in Toronto. He bought 53,963 shares this week at about $7 a share, raising his stake slightly to 33.2%, he says in an SEC filing. The latest purchases follow the 702,877 shares he bought last week, his first purchase of the studio’s stock since July 2010. It’s unclear whether he’ll be able to cast votes with his new holdings. Lionsgate set August 5th as the record date — purchases after then typically can’t be voted. But Canadian law allows for some exceptions. Still, Icahn could offer other candidates for the board at any point up to the meeting. Icahn, who has criticized Lionsgate’s spending and strategy, nominated five board candidates last year. All lost. Lionsgate said last week that it is running the same 12-director slate that was elected last year.
This is the biggest deal Google has ever made. We’ll see whether it gives the Web giant the resources it needs to make its Android-powered handsets even more potent competitors to Apple’s iPhone. But Motorola Mobility investors should be happy with the $40 a share offer — a 63% premium from Friday’s closing price: Billionaire Carl Icahn, who owns 11.4% of the company and had urged it to consider cash-generating options such as selling its patent portfolio, says the deal is “a great outcome for all shareholders of Motorola Mobility, especially in light of today’s markets.”
MOUNTAIN VIEW, Calif. & LIBERTYVILLE, Ill.– Google Inc. (NASDAQ: GOOG) and Motorola Mobility Holdings, Inc. (NYSE: MMI) today announced that they have entered into a definitive agreement under which Google will acquire Motorola Mobility for $40.00 per share in cash, or a total of about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares on Friday, August 12, 2011. The transaction was unanimously approved by the boards of directors of both companies.
The acquisition of Motorola Mobility, a dedicated Android partner, will enable Google to supercharge the Android ecosystem and will enhance competition in mobile computing. Motorola Mobility will remain a licensee of Android and Android will remain open. Google will run Motorola Mobility as a separate business.
Billionaire Carl Icahn bought 702,877 shares of Lionsgate this week, raising his stake in the movie and TV studio about 0.5% to 33.1%, he says in an SEC filing today. What appears to be his first purchase of the studio’s stock since July 2010 likely will lead company watchers to wonder whether he plans to make another move to take control — possibly at Lionsgate’s shareholders’ meeting in Toronto on Sept. 13. Icahn’s filing says nothing about his plans, just that he bought the stock in a range of $6.74-$6.90 a share. Lionsgate closed Friday at $7. But the timing is curious: The additional shares give him a bit more power if he wants to put directors he favors on the Lionsgate board. Icahn has said that the company’s been mismanaged and spends too much. He could offer other candidates for the board at any point up to the meeting. Last year, Icahn had five nominees, all of whom lost. Lionsgate said on Friday that it is running the same 12-director slate that was elected last year.
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).
Now that the Harry Potter series is done, it’s only natural that Wall Street would start to wonder: What’s the next movie franchise that will drive teens and adults to the box office in droves? And two analysts today think they have an answer. Lionsgate’s The Hunger Games, a four-movie series based on Suzanne Collins’ trilogy about two teens in a post-apocalyptic society struggling to survive a life-or-death contest. PiperJaffrey’s James Marsh raised his target price for Lionsgate shares to $12 from $10 based largely on his expectation that the films will “provide a material and identifiable catalyst” for the company. Cowen and Co’s Doug Creutz used similar language to project that Lionsgate shares will “outperform the market by at least 20% over the next 12 months.” That would be a welcome change for Lionsgate. Many investors soured on the company while billionaire Carl Icahn battled to take control and DVD sales began to collapse for the industry. Lionsgate’s shares have appreciated just 5% over the last 12 months while the overall market was up 20%. But the analysts say investors will turn the page as they begin to feast on news about Hunger Games. Marketing will begin late this year for the March 2012 release. Marsh says he expects it to become “the highest grossing film of all time at Lionsgate” with $150M in domestic box office sales.