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 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.
Billionaire Carl Icahn suffered another setback today in his hostile takeover attempt of Lionsgate. The Court of Appeal for British Columbia upheld a lower court ruling that Lionsgate had acted appropriately last year when it allowed a lender to swap his debt for equity. Icahn charged that the move was designed to keep Lionsgate management entrenched by diluting his stake in the film and TV production company. But the Canadian courts agreed with Lionsgate that the transaction was prudent. The company did not have to “forego the opportunity to reduce Lionsgate’s debt by some $100 million in order to preserve the status quo for Icahn’s benefit,” the Court of Appeal said. Earlier, the New York Supreme Court rejected a similar charge by Icahn that Lionsgate’s debt-for-equity swap violated the company’s fiduciary responsibilities to its shareholders.
The sharp elbowing between Lionsgate and Carl Icahn takes another turn in the courtroom. The Wall Street Journal reports that Lionsgate filed in court to force Icahn to disclose any confidential merger agreements he made with MGM. This continues Lionsgate’s assertion that Icahn was pushing for a merge between Lionsgate and MGM while lambasting Lionsgate management for exploring the same scenario. Lionsgate’s desire for transparency extended to an ask that Icahn fess up about a side deal he might have made with Mark Cuban to sell his stake. That info–which reportedly came from Girls Gone Wild kingpin Joe Francis–was refuted by Cuban, who told WSJ that if there was any questionable offer involved in the equation, it came when Lionsgate co-chairman Michael Burns made a third-party offer to buy his shares for more than whatever Icahn was willing to pay…
Christopher Tierney, the 31-year old actor/dancer who fell 30 feet and was badly hurt in a preview performance of Broadway’s Spider-Man: Turn Off The Dark, gave his first interview last night to Gotham’s WCBS-TV local news. Watch below as he describes an ordeal that included the following inventory of broken bones: 4 ribs, 3 vertebra, scapula, elbow, and the back of his head. It’s good to see Tierney moving around and even enthused about possibly returning to the show. But how’s that dancer’s body, full of screws and rods, going …
UPDATE 1:30 PM: Carl Icahn released the following reaction to Lionsgate shareholders today re-electing current Lionsgate management’s board of directors and not his own proposed 5 directors. from the sound of it, Icahn has zero intention of giving up:
We are disappointed that shareholder democracy has failed – or rather was subverted – in the case of Lions Gate’s annual meeting of shareholders as a result of the voting of over 16 million shares that were issued to director Mark Rachesky at a bargain price in a transaction approved by Lions Gate’s board of directors “at a midnight meeting” in July in an effort to entrench themselves. It is clear to us from our analysis of the preliminary voting results that had this dilutive transaction been rescinded, as we had requested of courts in New York and Canada, our slate of nominees would have been elected.
This whole situation is a very sad commentary on the state of corporate governance today. The biggest losers are the shareholders of Lions Gate who were deprived, as a result of the machinations of Lions Gate’s board and senior management, of the opportunity to receive a large premium for their shares in our tender offer. Unfortunately, shareholders might be in for even more pain. The shares have already lost more than 8% of their value since December 8, 2010, the day before the New York Supreme Court denied our motion for a preliminary injunction regarding the dilutive
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.”
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,
Carl Icahn has made another offer to MGM lenders in hopes of thwarting the prepackaged bankruptcy plan and Spyglass deal. He’s now offered to buy $1.6 billion in debt at a premium price of 53 cents on the dollar; last week, he offered to buy $963 million in debt. The offer expires Friday — the voting deadline for the bankruptcy/Spyglass plan that would put Gary Barber and Roger Birnbaum in charge. On Monday, Lionsgate sent a letter to MGM proposing that a Lionsgate-MGM merger, which Icahn now supports, could save about $100 million annually and increase revenues. If Icahn indeed manages to buy up the $1.6 billion, the total amount he would own would give him a majority of the debt. The Spyglass plan would give lenders 95% ownership of the company; a Lionsgate merger would give creditors a 55% equity stake.
Calling the proposed Spyglass plan a “presciption for disaster,” Carl Icahn on Thursday offered to buy another $963 million of MGM’s debt. He already owns around $500 million of it, so the sum would make him one of MGM’s largest creditors – with a stake of around 37%. Pending the offer, he would then be in a good position to approve a merger between Lionsgate and the studio, one he now supports. Some of MGM’s creditors are pushing hard for that prepackaged bankruptcy plan that would instead see Spyglass’ Gary Barber and Roger Birnbaum come in and run the studio. As a condition of his offer, Icahn said anyone selling to him must vote against the Spyglass plan; a vote is scheduled for Oct. 29. Icahn also stated on Thursday: “This is the critical decision point for MGM lenders, yet we are being rushed into an extraordinary Prepackaged Plan with limited information and input, on a “hurry up basis” that frustrates any dissent. I hope to defeat this “rush to judgment.”
Lionsgate is making its argument for a merger with hobbled studio MGM, a move that is supported by Carl Icahn, who has been trying to take over the mini-major while simultaneously buying up MGM debt. The timing is meant to provide an option for the current restructuring plan that will be voted on by MGM lenders this month. That plan would revive the Lion most likely as a production entity without distribution and marketing, headed by Spyglass chiefs Roger Birnbaum and Gary Barber. I’ve always thought the plan before creditors right now is an interim step, and that an alignment between the Lion and Lionsgate, or a studio like Warner Bros will happen down the road regardless, once the studio gets moving again on The Hobbit and James Bond. Here is Lionsgate’s release:
SANTA MONICA, CA, and VANCOUVER, BC, October 13, 2010 — Lionsgate (NYSE: LGF) (“the Company”), the leading next generation studio, today emphasized the value creation potential of its proposed merger combination with Metro−Goldwyn−Mayer Studios Inc. (“MGM”). The Company filed an Amendment to Schedule 14D-9 with the Securities and Exchange Commission yesterday disclosing that it sent an October 11 proposal to MGM regarding a potential business combination between the two companies. Under the terms of the proposal, the combined company would be owned by shareholders of Lionsgate and creditors of MGM.
“This is a unique, once in a lifetime opportunity to create a dynamic, forward-looking studio that unlocks
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.
The British Columbia Securities Commission dismissed Carl Icahn’s request for that cease trade order against Lionsgate. (Icahn Files Lawsuit Against Lionsgate Board.) The film/TV studio fending off his hostile takeover said it was “pleased”.
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
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